Mr. SPEAKER in the chair



PRIVATE BUSINESS

GRAND UNION CANAL BILL [Lords]

Motion made, "That the Bill be now read the Third time."—[King's Consent signified.]

Question put, and agreed to.

Bill accordingly read the Third time, and passed, with Amendments.

LONDON COUNTY COUNCIL (MONEY) BILL

As amended, considered.

Ordered, That Standing Orders 240 and 262 be suspended and that the Bill be now read the Third time.

GREENOCK PORT AND HARBOURS ORDER CONFIRMATION BILL

Read the Third time, and Passed.

Oral Answers to Questions — BRITISH ARMY

Overseas Service (Leave)

Mr. John Dugdale: asked the secretary of state for war whether he will consider granting a longer period of leave than 14 days to those men who have returned home from foreign stations when they have been absent for two or more years?

The Financial Secretary to the War Office (Mr. Arthur Henderson): This question is at present under active consideration.

Mr. Dugdale: When may we expect a reply?

Mr. Henderson: I think in a reasonably short space of time.

Voluntary Aid Detachments

Captain Peter Macdonald: asked the Secretary of State for War what will be the position in respect of pensions and allowances for members of the Voluntary Aid Detachment now under military law?

Mr. A. Henderson: V.A.Ds. will remain eligible as hitherto for the benefits of the pension code for members of the Forces. The same conditions will apply to them as to other women members of the Forces. In accordance with a specific recommendation of the report of the Committee on Voluntary Aid Detachments, V.A.Ds. will in general receive the same allowances as A.T.S. "other ranks."

Mr. Astor: Are any changes in the uniforms of the V.A.D. contemplated?

Mr. Henderson: No, Sir.

Captain Macdonald: asked the Secretary of State for War whether he has considered the apprehension aroused among members of the Voluntary Aid Detachment at the proposal in the recent White Paper that the office of commandant should be abolished, as this will mean that members of the Voluntary Aid Detachment will have no superior officers of their own to whom to appeal for help or advice; and. whether he will make a statement on the matter?

General Sir George Jeffreys: asked the Secretary of State for War whether, in giving effect to the recommendations of the Committee on Voluntary Aid Detachments, he will reconsider the recommendation that the services of Voluntary Aid Detachment commandants in military hospitals shall he dispensed with; and whether he is aware that, if this recommendation is carried into effect,. members of Voluntary Aid Detachments in military hospitals will be the only women's Service with no officers of their own to look after their administration and general welfare?

Mr. Henderson: I fully sympathise with my hon. and gallant Friends' concern for the care and welfare of the members of the Voluntary Aid Detachments. This question was carefully considered by the Committee before they made the recommendation referred to. The V.A.D. members usually work with the matrons and sisters of the Queen Alexandra's Imperial Military Nursing Service, who, under the supervision of the commanding officer of


the unit concerned, will carry out the duties which used to be performed by the V.A.D. commandants. My right hon. Friend regards this recommendation as no less acceptable than the rest of the Report.

Captain Macdonald: Is the hon. and learned Gentleman aware that the V.A.D. have always had their own commandants to appeal to and to administer their affairs, and would he reconsider the question of providing some means whereby they can continue to have their own commandant in the future?

Miss Rathbone: Seeing that these recommendations were agreed to by the Committee, on which the V.A.D. were represented, is it not a pity that there should be all this socially-inspired prejudice against them?

Mr. Henderson: The House will appreciate that this scheme has not yet come into operation. Also, it is an accepted principle in the Services that the care of personnel is vested in the officers under whom the personnel work. I am quite sure that when the scheme comes into operation the matrons and the sisters of the Queen Alexandra Imperial Nursing Service will live up to the standard which has always been set in the British Army, and will fulfil their responsibilities to the V.A.D. If, however, in the course of experience, it transpires that practical problems such as my hon. and gallant Friend has referred to arise, I am sure my right hon. Friend will give sympathetic consideration to such problems.

Earl Winterton: Will my hon. and learned Friend make it clear—which, if I may so, he has not yet done—that this was the result of agreement, or compromise, between representatives of the very people about whom Questions are now being asked? Will he also make it clear that no authoritative complaint against the proposal has come from the heads of the Service in question?

Mr. Henderson: Yes, Sir. As regards the latter part of the Supplementary, I will answer in the affirmative. No complaint has been received. As regards the representative character of those who signed the Report, it was signed by Lady Limerick, of the British Red Cross, and Lady Louis Mountbatten, of the Order of St. John. It is quite true that they did

express concern at one point as to the position of the V.A.D. in the event of the position of commandant being abolished. It is, however, stated in paragraph 25 of the Report that the assent of these representatives of the voluntary societies has been given in response to explanations furnished by the Director-General of Army Medical Services, concerning the more detailed application and implications of the above arrangements, and they and other members of the Committee are now satisfied that the welfare of the V.A.D. will be duly safeguarded.

Sir G. Jeffreys: Is the hon. and learned Member aware that the medical officers and the Queen Alexandra Service nurses have not the time to look after the welfare of a considerable body of members of the V.A.D. in addition to their other duties, and that the V.A.D. will he the only women's body who will not have their own officers to look after them?

Mr. Henderson: I cannot accept the suggestion that the Queen Alexandra Service will not lave the time to look after the welfare of the V.A.D.; but, as I have said, if, in the light of experience, it transpires that problems arise, I am quite sure my right hon. Friend will face up to them.

Captain Crowder: What is going to be done in the meantime with these commandants?

Billeting Rates

Sir Irving Albery: asked the Secretary of State for War, with reference to the new billeting rates announced on 1st June, whether he will explain how the new rates for heating, light, laundry and baths, offer an improvement in the amount paid, compared with the old rates?

Mr. A. Henderson: I will, with my hon. Friend's permission, circulate a detailed comparison of the billeting rates in force before 1st June and those now in force. Prior to 1st June payments for heat, light, laundry and hot water for baths were only made if a prior claim was submitted by the billetor and no payment was made for fire and light unless they were provided separately for the soldier. If these services are provided payments are now made automatically and those for fire and light are made even


if the soldier shares the billetor's fireside. Thus although the new rates for these services appear to result in a reduction in the payments previously made if only one or two soldiers are so billeted, in practice they will have this effect only in very few cases. If three or more soldiers are so billeted the new rates result in a net increase in the payments for heat, light, laundry and hot water. These payments must, however, be taken in connection with the payments made for lodging and for board and lodging. In most cases the new billeting rates taken as a whole give the billetor very substantial increases on the payments previously made.

Sir I. Albery: May I ask my hon. and learned Friend whether he is going to

The comparison between the old and new weekly rates of payment for heat, light, laundry and hot water for baths is as follows:


Billetor with
Old Rates per week.
New Rates per week.
Increase or Decrease per week.


Summer.
Winter.
Summer.
Winter.
Summer.
Winter.



s.
d.
s.
d.
s.
d.
s.
d.
s.
d.
s.
d.


One soldier
1
2
3
11
1
2
2
4
No change
—1
7


Two soldiers
2
1
4
10
2
4
4
8
+
3
—
2


Three soldiers
3
0
5
9
3
6
7
0
+
6
+1
3


Progressive increases for additional soldiers beyond three

11

11
1
2
2
4
+
3
+1
5

If full board and lodging, plus heat, light, laundry and hot water for baths is provided, the comparison is as follows:


Billet or with
Old Rates per week.
New Rates per week.
Increase or Decrease per week.


Summer.
Winter.
Summer.
Winter.
Summer.
Winter.



s.
d.
s.
d.
s.
d.
s.
d.
s.
d.
s.
d.


One soldier
25
1
27
10
28
0
29
2
+2
11
+1
4


Two soldiers
48
9
51
6
56
0
58
4
+7
3
+6
10


Three soldiers
72
5
75
2
84
0
87
6
+11
7
+12
4


Progressive increases for additional soldiers beyond three
23
8
23
8
28
0
29
2
+4
4
+5
6

Soldiers under Arrest (Dependants)

Mr. A. Edwards: asked the Secretary of State for War what steps have been taken to remove the hardships inflicted on the wives and dependants of soldiers under open arrest?

Mr. A. Henderson: As the answer is necessarily rather long, I will, with my hon. Friend's permission, circulate a state-

issue the explanatory pamphlet that he promised, explaining these rates?

Mr. Henderson: The explanatory note I am proposing to issue merely sets out in detail a comparison between the old rates and the new rates, and I believe that that will give my hon. Friend all the information he desires.

Sir I. Albery: Did not my hon. and learned Friend promise the House that he would issue a pamphlet explaining in detail the alterations that are taking place?

Mr. Henderson: I have just informed the House that that is exactly what I am circulating in the OFFICIAL REPORT.

Following are the tables:

ment in the OFFICIAL REPORT, explaining the changes recently made.

Mr. Edwards: Can my hon. and learned Friend say now that innocent people will no longer suffer for the mistakes of the men concerned?

Mr. Henderson: I think my hon. Friend will find the statement satisfactory.

Following is the statement:

Before 5th April, 1943, family allowance and allotments continued for the first 28 days of a period of detention, after which family allowance only remained in issue until release of the man from detention. Under the new procedure allotments continue, as before, for the first 28 days, after which any voluntary allotments cease and the qualifying allotment only continues in issue, in addition, of course, to family allowance. Under the old procedure the man's account was charged with the allotments, which continued for a period not exceeding 28 days, but he was able to secure a remission of up to 75 per cent. of any debt thus set up for good behaviour after finishing his term of detention. Under the new procedure the soldier's account is charged with the allotments for seven days only. Dependants' allowance already continues in full during detention and is not affected by the new decision, except that the soldier may receive a benefit under the allotment concession referred to above. This new procedure extends to cases where a soldier is sentenced to forfeiture of pay not involving detention and also to cases where a soldier is under compulsory stoppage of pay for the maintenance of his separated wife and/or family.

International Brigade

Mr. Driberg: asked the Secretary of State for War how many former members of the International Brigade have been discharged from the Army under paragraph 390, XVIII (a), King's Regulations, 1940?

Mr. A. Henderson: No soldier has been discharged from the Army under this sub-paragraph because he was formerly a member of the International Brigade; and it is not known how many soldiers who have been so discharged served in the International Brigade.

Mr. Driberg: Can the hon. and learned Gentleman give the approximate figure; is it simply a handful, or will it run into hundreds?

Mr. Henderson: No, Sir, I do not think that it would run into hundreds, but I am not in a position to give the approximate figure because the data is not available in the Department.

Next-of-Kin (Overpayment Refunds)

Miss Ward: asked the Secretary of State for War whether he will give an assurance that the circumstances under which the father of Lieutenant X. D. B. Hurre, of the Royal Tank Regiment, was asked to refund £2 12s. paid to the dead officer's account, owing to the notification of his death not having reached the authorities, will not be repeated in other cases?

Mr. A. Henderson: The sum of £2 12s. over-issued pay to which my hon. Friend refers was only one item in a provisional statement of account forwarded to the father of the late officer for his information. No claim for refund of this or of any other sum has yet been presented against the officer's estate. The final position of the officer's account is dependent on the receipt of information which is awaited from the Middle East. The question of any claim for refund will then be determined in accordance with the rules to which I referred in a reply to a number of Questions on the subject on 22nd June.

Miss Ward: Can my hon. and learned Friend say on what date that new Regulation came into force?

Mr. Henderson: I cannot give the date. It was in May. It has been in operation just under a month.

Miss Ward: Is my hon. and learned Friend aware with what contempt the country realised that the new Regulation was necessary?

Mr. Henderson: I think that the country will perhaps take a different view once it appreciates the working of this arrangement, which has, as I say, just been in, operation for a very limited period.

Mr. Denville: Can the Minister say whether this Regulation will be retrospective?

Mr. Henderson: It is not retrospective.

Royal Artillery Gallantry, Tunisia (Awards)

Mr. Kirby: asked the Secretary of State for War how many officers and men of the 155th Field Battery, Royal Artillery, have received military decorations in acknowledgment of their gallant stand in Tunisia; and whether he will give the names of personnel living, missing or dead, so honoured?

Mr. A. Henderson: Two Distinguished Service Orders, one Military Cross, one Distinguished Conduct Medal and four Military Medals have been awarded to officers and men who took part in the action referred to by my hon. Friend. I will, with his permission, circulate the names in the OFFICIAL REPORT.

Following are the names:

The undermentioned Immediate awards have been conferred on personnel of the 172nd Field Regiment and 155th Field Battery, Royal Artillery:

D.S.O.

Major (temporary Lieutenant-Colonel) W. D. McN. Graham,

R.A.

*Major (temporary Lieutenant-Colonel) H. C. C. Newnham, Hampshire Regiment.

*This officer was in action on February 26th with 155th Battery.

M.C.

Lieutenant (temporary Captain) J. S. Perry, R.A.

D.C.M

No. 1091288 Lance-Bombardier R. S. Hitchin, R.A.

M.M.

No. 854768 Sergeant E. R. Lodder, R.A.

No. 1091399 Bombardier G. H. Wallis, R.A.

No. 1148042 Gunner R. Kennard, R.A.

No. 1098016 Gunner W. Shelton, R.A.

An announcement of the King's approval of the above awards was published in the "London Gazette" dated 22nd April, 1943.

Soldiers' Deaths (Information to Next-of-Kin)

Mr. Summers: asked the Secretary of State for War whether he will disclose to widows and dependants of deceased soldiers such circumstances in connection with their deaths as will enable such widows and dependants to judge whether they are entitled to pensions?

Mr. A. Henderson: The immediate cause of death is communicated to the next-of-kin, and where further information is asked for a fuller account of the circumstances in which death occurred is given, as soon as the details are available.

Mr. Summers: Is my hon. and learnt Friend aware that the practice of his Department in informing the next-of-kin that a man has been killed in the service of his country leads them only to expect a pension that may well be varied by this Regulation? Further, as long as the onus of proof is on the individual—and unreasonably placed there—does he not agree that this information should be made available?

Flying and Parachute Duties (Injuries and Wounds, Pay)

Mr. Bellenger: asked the Secretary of State for War whether he has now given consideration to allowing paratroops to retain their extra pay of 2s. a day for a period of three months if incapacitated as a result of wounds?

Mr. A. Henderson: Yes, Sir. Instructions are now about to be issued authorising the retention of this additional pay during periods of absence on account of injuries due to flying or parachute duties, or on account of wounds received in action against the enemy, for a period not exceeding 91 days, provided that the recipient is not in the meantime posted for duty with a unit for which the additional pay has not been approved.

Overseas Troops (Families)

15. Mr. Bellenger: asked the Secretary of State for War whether, in the case of Regular soldiers who have been overseas for more than six years and who are now being brought back to this country, provision will be made to bring back their families who are residing abroad with them; and will their 'chefs be able to take their families overseas in view of the probability of no further relief for such troops for many years to come?

Mr. A. Henderson: The answer to the first part of the Question is "Yes, Sir," but owing to the shipping difficulties the soldier and his family may not be able to travel together. No one can say how long it will be before the troops now going overseas are relieved but for a number of reasons families are not allowed to go abroad.

Mr. Bellenger: Can my hon. and learned Friend make an exception in the case of Regular officers and other ranks who are now being drafted overseas, because probably their stay overseas will be very extensive?

Mr. Henderson: No, Sir, not in wartime. I think it would be very inadvisable to accede to this request in wartime.

Direct Commissions

Sir Waldron Smithers: asked the Secretary of State for War why men who have recently been released from reserved occupations are being granted commissions without going through the ranks?

Mr. A. Henderson: Direct commissions are granted to a certain number of men who possess special qualifications urgently needed in the Army. In the main these are now professional engineers for the Royal Electrical and Mechanical Engineers. At this stage in the call-up of men for the Forces it is inevitable that most of them do come from reserved occupations.

Sir W. Smithers: Will my hon. and learned Friend say whether he has considered a typical case, the details of which 1 have already sent to him?

Mr. Henderson: Yes, Sir; we have been unable to find any trace of the man in question having been commissioned.

Auxiliary Territorial Service

Mr. A. Edwards: asked the Secretary of State for War whether he is aware that in many camps complaints are made that members of the Auxiliary Territorial Service cannot obtain soft drinks in the canteen and are being compelled to drink beer and that there is difficulty in getting water; and whether he will see that in all canteens there is an adequate supply of drinking water?

Mr. A. Henderson: Water is obtainable at all canteens and any demand for it will be met. On the question of soft drinks I would refer my hon. Friend to the reply given to my hon. Friend the Member for the Combined English Universities (Miss Rathbone) on 13th April. If my hon. Friend will send me particulars of any specific case he has in mind I will have it investigated.

Mr. Edwards: Is not my hon. and learned Friend aware that at the camps I have visited during the last two weeks complaints were made by officers who thought it a great pity that the girls in the camps should be almost forced into drinking beer in the canteens because no soft drinks were available? Ought not his Department to take up this matter on their own initiative?

Mr. Henderson: It would be of great assistance to me and the Department if my hon. Friend would let me have the names of the camps.

Mr. John Dugdale: But is not beer virtually a soft drink anyhow?

Mr. Leach: Has there been any demand for water?

Miss Rathbone: Arising out of a previous Question I put on this subject, is the hon. and learned Gentleman aware that there was soon afterwards an abundant supply of soft drinks at the canteen I referred to, showing that when a grievance is brought to the notice of the authorities there is no scarcity of soft drinks but that they are not always supplied unless specially asked for?

Deceased Officers (Payments to Widows)

Major-General Sir Alfred Knox: asked the Secretary of State for War whether he will undertake in future to permit the widow of an officer who loses his life on active service to draw the full amount of her husband's pay for the month in which he died?

Mr. Henderson: My hon. and gallant Friend's suggestion has been carefully considered, but I regret that it is not considered desirable to adopt it. He will appreciate that two-sevenths of an officer's pay and family lodging allowance in full continue in issue to the wife for 91 days from the date of his death.

Sir A. Knox: Does the widow of an officer receive his pay for 91 days after his death?

Mr. Henderson: Two-sevenths of his pay, plus family allowances.

Mr. Bellenger: But is not that two-sevenths the contribution from the officer himself? Will not the Government supplement that?

Mr. Henderson: No, Sir.

Sir A. Knox: Is not the State supposed to be a model employer, and is it not better to do away with this pettifogging means test?

Mr. Henderson: My hon. and gallant friend must realise that it possibly would not work out as he imagines. One officer may get a whole month's pay and another officer only one day's pay.

Regulated Areas Order

Mr. Wakefield: asked the Secretary of State for War on what date the Emergency Powers (Defence) Regulated Areas Order (S.R. & O., No. 810 of 1943) signed by him on 1st June, came into operation?

Mr. A. Henderson: This Order, which, as explained in the note on it, made a few amendments to the description of an area bordering the Bristol Channel which had, on 6th April last, been declared to be a regulated area for the purposes of the Defence Regulations, came into force on the day it was signed. I can, however, assure my hon. Friend that no one has been inconvenienced because of this.

Special Duties (Temporary Rank)

Mr. Burke: asked the Secretary of State for War whether he is aware of the irritation arid dissatisfaction caused among men who, because of ability and efficiency, are given special duties to perform and accordingly promoted in rank often for long periods and who, when they have finished these special tasks satisfactorily, immediately lose their stripes; and will he consider making such promotions war substantive?

Mr. A. Henderson: The normal rules for promotion in war provide for the grant of war substantive rank after the requisite period of time has been served in acting rank. In rare cases in which particular instructional qualifications of an exceptional nature are required, local non-commissioned rank is granted and such rank does not become war substantive. The holders of such rank are not required to possess the all-round military qualifications of a non-commissioned officer and if the local rank given were permitted to become war substantive, they would in many cases be unfitted for the normal duties of a noncommissioned officer on return to general duty and would, therefore, be liable to reduction for inefficiency. There is no evidence available that the existing procedure gives rise to any dissatisfaction.

Mr. Burke: Does not my hon. and learned Friend realise that when a man has spent two periods on special jobs because of special ability and then loses his stripes it requires some explaining away to his friends? Does it not make for had discipline?

Mr. Henderson: If my hon. Friend has any special case in mind perhaps he will let me have particulars. As regards the general position I think it is accepted in the Army that when a man ceases to hold a post that carries with it a certain rank he may then be liable to have to take the rank that goes with a lower post.

Mr. Burke: But where a man has done a special job on two occasions for six months ought he not to be entitled, as. a reward for his extra efficiency, to retain his stripes?

Mr. Henderson: I would like to have the facts of such a case.

Mr. Burke: I will send them on.

Commander Sir Archibald Southby: Is the hon. and learned Gentleman aware that this system of temporary rank which has to be given up when a job is finished causes a considerable amount of misunderstanding among officers and men and is very unpopular just because it is so unfair?

Mr. Henderson: I am certainly aware of the feeling in the Army on this problem—anyone who has served in the Army must be aware of it—but I am afraid it is not possible in present circumstances to do anything about it.

Home Guard (Motor Cars)

Major Peto: asked the Secretary of State for War whether he is aware that in some rural districts where considerable distances have to be covered the authorised establishment of motor transport for the use of the Home Guard is so limited that it does not include a motorcar for the use of the company or, platoon commander; and whether he will arrange that in such cases, where officers use their own motor-cars for Home Guard work, they shall he entitled to compensation in the event of the motor-car being lost or damaged by enemy action?

Mr. A. Henderson: All War Department cars held by Home Guard units are held in a pool in each unit. They are not allocated to the holders of specific appointments. Home Guards may place their cars at the disposal of the unit, either for part-time or whole-time service. If a car which has been accepted for Home Guard use is not insured under the War Damage Act and suffers war damage when on


authorised Home Guard duty, the owner will be entitled to compensation provided the unit continues to require the use of the car and the owner certifies that the car will remain available for continued use by the Home Guard. An officer who has not placed his car at the disposal of the Home Guard is not authorised to use it on Home Guard duty and will, therefore, not be entitled to compensation from Army Funds. He may, of course, insure under the War Damage Act.

Sir A. Southby: Is not the hon. and learned Gentleman aware that in many cases officers have placed their cars at the disposal of the Home Guard and have used them for Home Guard duties? Unless the car comes under the establishment allowed for the local Home Guard no compensation is payable in the event of damage by enemy action or while the car is being used on Home Guard service.

Mr. Henderson: I do not think it would depend on the establishment if the appropriate authorities authorise the use of the car for Home Guard purposes.

A.27 Tank

Mr. Hammersley: asked the Secretary of State for War whether he is aware that all public references to the A.27 tank are automatically censored, although he publicly mentioned this tank by name, and frequent references to this tank have since been made in the House of Commons; and will he give instructions to discontinue this item of unnecessary military censorship?

Mr. A. Henderson: There is no objection to the publication of the name A.27, but it is not in the public interest for any information about its characteristics to be given.

Mr. Hammersley: While I appreciate the hon. and learned Gentleman's difficulty in maintaining that the speeches of his right hon. Friend should receive the publicity which they deserve, while at the same time part of them are considered secret, is it not a fact that the military censorship seems to be under the impression that all_criticism of tanks and tank policy should be regarded as secret? Would he institute a more up to date view of this matter?

Mr. Henderson: I think the hon. Gentleman has a Question on our next Sitting

Day to the Minister of Information when, no doubt, he will get an appropriate reply.

Oral Answers to Questions — PRISONERS OF WAR

Mr. Turton: asked the Secretary of State for War whether he will increase the special allowance credited to the account of an officer prisoner of war in Italy, so that it may be sufficient to cover the increased charge which the Italian Government is now imposing?

Mr. A. Henderson: I am glad to say that the increased daily charge of 8.6o lire imposed by the Italian Government has now been withdrawn, with effect from the date it was imposed, namely, 1st July, 1942.

Commander Locker-Lampson: asked the Secretary of State for War how many German prisoners were employed in this country during the last war; and whether, he intends employing them in this war?

Mr. Henderson: At one time in the last war as many as 65,497 German prisoners were employed in this country. The answer to the last part of the Question is "No, Sir."

Commander Locker-Lampson: Does not my hon. and learned Friend agree that German vandals who have tried to destroy this country should be employed to help us to restore it?

Mr. Henderson: For security reasons it is preferred not to use Germans in this war. We prefer to use Italian prisoners of war, of whom there is a plentiful supply.

Commander Locker-Lampson: Are we to be afraid of the Germans in our own country?

Mr. Thorne: Would not prisoners of war be very much better engaged in some kind of work than simply loafing about?

Mr. Henderson: That might well be, but I am dealing with the employment of German prisoners of war in this country.

Oral Answers to Questions — MISSING PERSONNEL, FAR EAST (DEPENDANTS' ALLOWANCES)

Major Leighton: asked the Secretary of State for War whether marriage allowances are still being paid to the wives of


men reported missing in the Far Eastern theatre of war; and whether he can assure the House that they will not be expected to refund these payments if their husbands are eventually proved to have been killed?

Miss Ward: asked the Secretary of State for War whether he will give an assurance that the regulations governing any repayments of pay and allowances which may be due from Service personnel killed in action shall not operate for the next-of-kin of His Majesty's Forces in the Far East who are now posted as missing, but who may subsequently be reported killed, and that no repayments will be asked for?

Mr. A. Henderson: Any pay and allowances admissible in respect of an officer or other rank whilst missing are not in any circumstances recoverable if it is subsequently found or presumed that he was dead.
The House will like to know, in this connection, that we have again examined the periods for which normal allowances are continued to wives and other dependants of those reported missing in the Far East and have decided further to extend these periods. I will circulate details in the OFFICIAL REPORT.

Major Leighton: Will my hon. and learned Friend see that wide publicity is given to this answer, because there are a great many who do not realise how they stand, and if it was published by the Press or done by directly informing the people, it would have the desired effect?

Mr. Henderson: I can only assume that the usual publicity will be given to a matter which is of great interest to many people.

Colonel Sir A. Lambert Ward: Would it not be correct to say that, if a man is killed, his widow will receive a widow's pension from the date of his death which is invariably higher than the marriage allowance which she would have been receiving up to that time?

Mr. Henderson: I would like to have notice of the Question raising the comparisons between the payments by the War Office and those made by the Ministry of Pensions.

Following arc the details:

Allowances and allotments to wives and dependants of those reported missing in

the Far East will be continued for the following periods, if the officer or man continues to be missing for so long.

Malaya and Burma, if missing before 1st November, 1942—Up to 95 weeks from the date the relatives were notified or to 31st January, 1944, whichever is the earlier.

Netherlands East Indies, where posted missing from 1st February, 1943—Up to 43 weeks from the date the relatives were notified or to 31st January, 1944, whichever is the earlier.

Burma, if missing on or after 1st November, 1942, and before 1st June, 1943—Up to 52 weeks from the date the relatives were notified.

It will be observed that the date of expiry of these extensions is the same for Netherlands East Indies, Malaya and the earlier Burma cases: and that the difference in the periods between Netherlands East Indies cases and those in Malaya and Burma is approximately the same as the interval between the fall of Singapore and the date from which those known to have reached Netherlands East Indies (and not subsequently heard of) were posted missing.

The extension of the later Burma cases carries them beyond the date on which the earlier cases would expire.

These cases, and new cases arising after 31st May, 1943, will again be reviewed, before the end of the year.

Oral Answers to Questions — SCOTLAND

Housing Construction

Mr. McNeil: asked the Secretary of State for Scotland how many of the recently sanctioned 1,000 houses have been tendered for; how many contracts have been placed; how many have been approved by the Department of Health for Scotland; and on how many construction has been started?

The Secretary of State for Scotland (Mr. T. Johnston): Tenders have been received for 254 houses, and these have all been approved. Work is being carried out on 204 houses and will begin on the remaining 5o within a few days. I expect to receive further tenders at an early date, and I have recently re-emphasised the urgency of the scheme to all the local authorities concerned. I have satisfied


myself that all plans submitted to the Department have been approved, and approved with promptitude.

Mr. McNeil: Does not my right hon. Friend agree that after four months someone is to blame for 75o houses being still untendered for, and is his Department prepared to take any action against any backward local authorities so that people may know who they are and can deal with them?

Mr. Johnston: Yes, Sir. In my answer I said that I have recently re-emphasised the urgency of the scheme to the local authorities concerned and that there is only one county council at this moment which has not selected sites.

Mr. Shinwell: Can my right hon. Friend say why he has managed to make such substantial progress in Scotland regarding these houses while only 54 tenders have been approved for the 3,000 agricultural cottages for England? Is not this an injustice to England?

Mr. McGovern: Are these r,000 houses entirely new houses, or have a number of them been under construction for a long time and been set aside during the period of the war?

Mr. Johnston: The 1,000 houses in this scheme are entirely new.

Major Leighton: Can the Minister state the price?

Mr. Johnston: While tenders are still being received from some county councils it would be highly inadvisable to disclose the price.

Mr. Austin Hopkinson: Can the Minister say why he has not been subjected to the same virulent criticism as the Minister of Health?

Mr. Kirkwood: Because he is a Scotsman.

Mr. Kirkwood: asked the Secretary of State for Scotland whether, in view of the urgent necessity of preparing a large-scale production of houses in Scotland he will consider the expediency of extending the scope and functions of the Scottish Special Housing Association?

Mr. Johnston: The Scottish Special Housing Association is a non-profit

making organisation operating with State capital and is, in my opinion, a very useful house-building agency supplementing the operations of the local authorities. The Association's powers were extended in 1939 to enable it to build houses in any part of Scotland, and I am at present considering plans for a large-scale programme of building by the Association immediately after the war.

Agricultural Holdings (Tenure)

Mr. Snadden: asked the Secretary of State for Scotland whether he is aware that tenants of agricultural holdings in Scotland are being given notice to quit in spite of their willingness to arbitrate on rentals and in spite of any evidence of bad husbandry; and will he consider submitting suitable legislation in order to provide reasonable security of tenure in such cases?

Mr. Johnston: I understand that there have been a few cases such as those mentioned by my hon. Friend. As he will be aware, there are certain provisions in Defence Regulations designed for the protection of agricultural tenants in this matter, though I recognise that these provisions will not safeguard tenants in every case. I understand that the National Farmers' Union is collecting and examining evidence on this subject.

Hill Sheep Committee

Mr. Snadden: asked the Secretary of State for Scotland whether he is now able to state when the Committee on Hill Sheep Farming in Scotland will be in a position to present its Report; and whether an interim Report may be expected shortly?

Mr. Johnston: I am informed that the Hill Sheep Committee have made substantial progress and hope shortly to be in a position to frame their recommendations. I do not expect to receive an interim Report.

Mr. Snadden: In view of the publication of the recent report on forestry, is it not necessary that this Committee should report also, and will the right hon. Gentleman press them to do so?

Mr. Johnston: The fact that the Forestry Commission have published their Report is no reason why I should press this Committee on an entirely different subject prematurely to publish their recommendations.

Major McCallum: As the Forestry Commission's Report deals with land normally occupied in hill sheep farming, is there any prospect of having the Hill Sheep Farming Committee's Report before the Forestry Report is discussed?

Mr. Johnston: I understand that arrangements have been made for the Forestry Commission Report to be discussed at an early date. I do not anticipate that the Report of the Committee upon hill sheep farming will be published prior to that discussion.

Major McCallum: Why has there been this long delay in the publication of the Report of the Committee?

Mr. Johnston: I do not believe that there has been undue delay. The matter is one of great complexity, and it has involved the Committee in prolonged discussions with numerous interests.

COAL PRICES

Mr. Wootton-Davies: asked the Minister of Fuel and Power whether he is aware that in some mining districts the differentiation in price between treated and untreated coal is only is. per ton, which is inadequate to cover the total cost of the cleaning operation; and whether, when he reviews coal prices in July, 1943, he will consider removing this penalty on efficiency by the adjustment of the prices for treated coal to a more equitable basis?

The Minister of Fuel and Power (Major Lloyd George): I am aware of the position to which my hon. Friend refers. The matter has been receiving my close attention and will again be reviewed should an increase in coal prices become necessary.

Mr. R. J. Taylor: If the right hon. and gallant Gentleman is considering increasing the price, will he also make it certain that coal will be cleaned?

MOTOR CARS (PETROL ALLOWANCE)

Sir John Mellor: asked the Minister of Fuel and Power whether, in substitution for licensing and insuring a motor car as a condition precedent to an application for a petrol allowance being con-

sidered, he will direct petrol officers to consider applications and give provisional decisions if the amount of the Licence Duty is deposited?

Major Lloyd George: I have considered this suggestion carefully. The main purpose of petrol rationing is, however, to save petrol and, whilst I recognise that the present system causes some difficulty and inconvenience to a small number of genuine applicants, my hon. Friend's suggestion would entail an unjustifiable amount of additional work and staff time in my regional offices, and I regret that I cannot see my way to adopt it. At the same time I am instructing my Regional Petroleum Officers to give all the help they can within the limits of the present system.

Sir J. Mellor: Will the right hon. and gallant Gentleman now correct the inconsistent replies given by himself and the Under-Secretary on 4th May and 22nd April, respectively?

Major Lloyd George: I do not recognise anything inconsistent, and I do not recognise any cause for a withdrawal.

Sir J. Mellor: I beg to give notice that I will raise the matter on the Adjournment.

Oral Answers to Questions — TRADE AND COMMERCE

Retailers' Licences (Ex-Service Men)

Sir Leonard Lyle: asked the President of the Board of Trade whether special consideration in respect of the issue of a licence will be shown to an invalided ex-Service man who returns to his native town and wishes to resume his previous business?

The President of the Board of Trade (Mr. Dalton): Yes, Sir. I gave instructions to this effect last year.

Sir L. Lyle: Will the right hon. Gentleman also use his utmost endeavour to do away with all similar vexatious controls in order that our freedom may be restored?

Mr. Dalton: It is necessary to maintain control in order to give preference to invalided ex-Service men. If the controls were done away with, they would stand a poor chance.

Companies Act (Directors)

Mr. Rhys Davies: asked the President of the Board of Trade how many prosecutions have been instituted for infringements of Section 145 of the Companies Act, 1929; and what steps are usually adopted to see that the provisions of this Section are implemented?

Mr. Dalton: Proceedings have been instituted, or initiated, by the Board of Trade against 172 persons in respect of 73 companies for infringement of this Section. The Board investigate all cases brought to their notice in which it is alleged that the Section has been infringed. The usual procedure is to bring the complaint to the notice of the company concerned. Proceedings are instituted only in serious cases or when a warning has been disregarded.

Mr. Davies: Is it not a fact that this piece of legislation is not implemented in general, and, if I give my right hon. Friend a batch of documents, will he look at them?

Mr. Dalton: I shall be very glad to study any papers my hon. Friend gives me, but my own understanding is that this Section is faithfully carried out by the vast majority of those concerned.

Post-war Overseas Trade

Mr. Hannah: asked the President of the Board of Trade, what have been the activities of the Department of Overseas Trade during the past 18 months; and what encouragement is being given to British manufacturers for the development of post-war markets?

Mr. Dalton: My right hon. Friend the Secretary to the Overseas Trade Department and his staff are constantly in touch with exporters, in regard both to war-time and post-war problems of export trade. It is the duty of the Department of Overseas Trade to make preparations for the revival of export trade as soon as circumstances permit, and much time and study are being devoted to these questions.

Mr. Shinwell: Would it be convenient for the Board of Trade to allow the Secretary of the Overseas Trade Department to explain his activities personally in the House? Might we hear his voice occasionally?

Mr. Dalton: I am sure my right hon. Friend will be very delighted if oportunities are sought through the usual channels for the allocation of time for a Debate.

Mr. Shinwell: Will he not make an occasional appearance so that we might see him?

Sir Granville Gibson: How often does the Post-War Trade Committee meet?

Mr. Dalton: It meets very frequently but not at any fixed intervals. I will have a talk with the hon. Gentleman if he cares to do so.

Mr. A. Edwards: Is it not a fact that the Department's staff has been considerably reduced?

Mr. Dalton: Yes, it has been reduced to what might be regarded as a dangerously low level, having regard to the great importance of post-war export trade. A smaller number of officials are doing more work.

Mr. Shinwell: Has the Secretary been reduced?

Clothing Coupons (Women Auxiliaries)

Mr. Bellenger: asked the President of the Board of Trade whether he will enable women Auxiliaries to draw clothing coupons in respect of those articles of their clothing, lost by laundries, which they have to replace from their own resources?

Mr. Dalton: I have already made arrangements for coupons to be issued in such cases, if the remaining civilian clothing is insufficient for wear on leave.

Laundries (Wash-Boilers)

Mr. Burke: asked the President of the Board of Trade whether he will consider the advisability of granting a licence for the manufacture of gas-heated wash-boilers in view of the fact that laundries cannot accept further work which necessitates more washing to be done at home, and in view of the fact that boilers installed many years ago now require renewal?

Mr. Dalton: The manufacture of gas-heated wash-boilers would involve the withdrawal of large numbers of engineering workers from war-work, and the use of considerable quantities of scarce materials needed to make arms. I regret, therefore, that no licences for new manufacture can be granted at present.

Mr. Burke: Is my right hon. Friend aware that at least one firm which has been in touch with his Department had the means of manufacturing these boilers for which there is a real demand without calling upon extra man-power or further supplies of material?

Mr. Dalton: A great deal of copper and zinc is required, and we want it for making arms. If my hon. Friend sends me particulars of the cases referred to I will look into them.

Concentration of Industry

38. Sir L. Lyle: asked the President of the Board of Trade what further concentrations of specific industries he is contemplating?

Mr. Dalton: The concentration of the clothing industry is now proceeding. No further concentrations are contemplated at present.

Exports to Neutral European Countries

40. Sir L. Lyle: asked the Parliamentary Secretary to the Ministry of Economic Warfare to what extent any exports from this country are now being sent to the neutral countries in Europe; and how current quantities differ from pre-war figures?

The Parliamentary Secretary to the Ministry of Economic Warfare (Mr. Dingle Foot): Goods continue to be exported from the United Kingdom to the neutral countries in Europe in so far as supply, shipping and blockade considerations allow. As my hon. Friend is probably aware, statistics of such exports in wartime are confidential. In every case, except that of Turkey, their present volume is considerably less than before the war.

Professor Savory: How much tea and sugar is being sent to Eire?

Mr. Foot: That is another question, and perhaps the hon. Member will put it down.

COMPANY LAW (APPOINTMENT OF COMMITTEE)

37. Major Sir Jocelyn Lucas: asked the President of the Board of Trade whether he can now make any further statement on the amendment of company law?

Mr. Dalton: Yes, Sir. I have appointed a Committee with the following terms of reference:—
To consider and report what major amendments are desirable in the Companies Act, 1929, and, in particular, to review the requirements prescribed in regard to the formation and affairs of companies and the safeguards afforded for investors and for the public interest.
I am glad to say that Mr. Justice Cohen has consented to act as Chairman. The other members of the Committee are:

Mr. B. G. Catterns,
Mr. Arthur fforde,
Mr. M. L. Gedge,
Professor Arthur Goodhart,
Mr. Geoffrey Heyworth,
Sir Edward Hodgson,
Mr. Russell Kettle,
The hon. and gallant Member for Brentford and Chiswick (Colonel H. Mitchell),
Mr. G. W. Thomson,
Mr. L. H. Watson,
Mr. R. P. Wilkinson, and
The hon. Member for Kennington (Mr. John Wilmot).

Sir J. Lucas: While thanking my right hon. Friend for his satisfactory reply, may I inquire whether the Committee will deal with the undesirable feature of nominee shareholders?

Mr. Dalton: I have no doubt, following on a conversation I have had with Mr. Justice Cohen, that nominee shareholdings and the possibility of their abuse will be one of the matters the Committee will go carefully into. My hon. and gallant Friend has taken a great interest in this matter, and I hope he will put his knowledge at the disposal of the Committee. They will be very glad to have it.

Mr. Bellenger: Is not the hon. Member for Kennington (Mr. Wilmot) the Parliamentary Private Secretary to my right hon. Friend, and is it not the custom in this House that hon. Members intimately concerned with the Department should not take part in such committees as this?

Mr. Dalton: No, Sir. The position of Parliamentary Private Secretaries has frequently been defined in answers to Questions. They are certainly not precluded from a form of public service in which their special knowledge will be of value. In fact, there is a recent precedent for this in the valuable service rendered by my hon. Friend the Member for Batley


and Morley (Mr. Hubert Beationont) on the Luxmoore Committee with regard to agricultural education. It is not desirable that hon. Members outside the Government should be debarred from giving the fullest service to the public interest in this way.

Sir A. Southby: Are they outside the Government?

AFFORESTATION

41. Mr. De la Bère: asked the right hon. and gallant Member for Rye, as representing the Forestry Commissioners, whether, arising out of the 50-year plan of the Forestry Commission, he will give an assurance that consideration will be given to the planting of English oak trees in addition to the scheme for the development of a large acreage of conifers?

Colonel Sir George Courthope (Forestry Commissioner): The answer is in the affirmative.

Mr. De la Bère: In view of the example set by his illustrious forbears in this respect, may I thank my hon. and gallant Friend very much for his reply?

FOOD PROSECUTION, LONDON (HEARING IN CAMERA)

Sir A. Southby: asked the Secretary of State for the Home Department whether he is aware that summonses against an individual for supplying to a catering establishment meat in excess of the permitted amount were heard in camera at the South-Western Police Court, on 16th June, at the request of the prosecution; and on what grounds this request was made?

The Under-Secretary of State for the Home Department (Mr. Peake): Under Section 6 of the Emergency Powers (Defence) Act, 1939, it is for the court to decide whether it is expedient in the interest of public safety or the defence of the realm that a case, or any part of a case, should be heard in camera, and it would not be proper for me to comment on the exercise of a judicial discretion in any particular case. The prosecution, to which my hon. and gallant Friend refers, is being conducted by the Director of

Public Prosecutions and is still sub judice as it has only been completed against one of the three defendants.

Sir A. Southby: Can my right hon. Friend say how many prosecutions have been instituted for this sort of offence, and for black market offences generally? Where convictions have been secured, will he see that the true names and addresses of the convicted persons are published in the Press?

Mr. Peake: I am afraid that I should require notice of both parts of my hon. and gallant Friend's supplementary.

REGIONAL TRANSPORT COMMISSIONER (EASTERN REGION)

Sir Douglas Thomson: asked the Parliamentary Secretary to the Ministry of War Transport (1) who has been appointed Regional Transport Commissioner for the Eastern Region; at what salary; and from where does he carry out this work;
(2) who is now acting as director of Alternative Motor Fuels; at what salary; and where the Department is situated?

The Joint Parliamentary Secretary to the Ministry of War Transport (Mr. Nod-Baker): Sir Alfred Faulkner has been appointed Regional Transport Commissioner for the Eastern Region, with headquarters at Cambridge. Sir Alfred Faulkner is also continuing to act for the present as Director of Alternative Motor Fuels, with headquarters in London. His salary as Regional Transport Commissioner is £1,500 a year; he receives no additional salary for his work as Director of Alternative Motor Fuels.

Sir D. Thomson: Is the Minister in effect saying that the Director of Alternative Motor Fuels has not a full-time job?

Mr. Noel-Baker: No, Sir; I am saying that for the present—the matter is to be reviewed in two months time—it is desirable to keep Sir Alfred Faulkner in contact with this Alternative Fuels in view of the special knowledge of the work he has already done.

VICTORIA CROSS (PENSIONS)

Lady Apsley: asked the Prime Minister whether, since the annual grant payable to a holder of the Victoria Cross is


only £10 and has not varied since the institution half a century ago, he will, in connection with present-day values, increase this sum to £100, free of Income Tax, and in the case of the posthumous conferment of the honour, waive any test of the means of the next-of-kin?

The Deputy Prime Minister (Mr. Attlee): Provision already exists whereby the normal pensions of £10 and awarded to recipients' of the Victoria Cross and Bar respectively may, in cases of need, be increased to £75 in all. It is not considered that pensions on this scale are inadequate for the purpose for which they are intended. Except in the Indian Army, there are no pensions to next-of-kin.

Lady Apsley: Does not my right hon. Friend think that since 1856, when the V.C. was instituted, there are real grounds for raising this amount?

Mr. Attlee: It is a matter for consideration, but I do not think there have been any particular complaints about it.

Sir I. Albery: Will the right hon. Gentleman give this matter further consideration?

Mr. Attlee: Certainly, Sir.

Mr. De la Bère: Favourable consideration?

CONCENTRATION OF INDUSTRY (DEPARTMENTAL CO-OPERATION)

Sir W. Smithers: asked the, Prime Minister whether, when making arrangements for the concentration of any industry, he will take steps to secure better co-operation between the Ministries of Labour, Supply and Production?

Mr. Attlee: I can assure my hon. Friend that it is the invariable practice for consultations between all the Government Departments concerned to take place both before and during the concentration of any industry.

Sir W. Smithers: While recognising that during war-time some concentration may be necessary, may I ask whether the Departments will do their utmost to avoid dislocation and hardship, especially to small firms?

Mr. Attlee: Certainly, Sir, that is done.

Sir W. Smithers: No, it is not.

ARTIFICIAL ELECTRICAL DISTURBANCES

Mr. Purbrick: asked the Lord President of the Council whether he will investigate the application in America whereby a neutraliser man-made electrical disturbance more powerful than the greatest storms of thunder and lightning can be reduced to a whisper, and in one test a 25,000-volt spark was projected directly to a wireless receiving set; and will he consider the applicability of this method for the artificial promotion of seismic disturbances, volcanic eruptions, etc.

Mr. A. S. L. Young (Lord of the Treasury): I have been asked to reply. Further information about this device is being sought from the appropriate scientific authorities in the United States of America. When this is received, the potential applications of the device will be fully examined. My right hon. Friend is, however, advised that any device which is designed for the reception of radio waves in the presence of electrical noise is unlikely to be of use as a generator of seismic or volcanic disturbances.

Mr. Purbrick: Is my hon. Friend aware that there are very distinguished scientists who have frequently referred to the relation between the earth's magnetism and earthquakes and their connection with electricity, and will he bear this in mind and study these things when the time comes?

Mr. Young: I will see that my right hon. Friend is advised of the Question.

Mr. Hopkinson: Would the hon. Member kindly explain the exact meaning of the words "neutraliser man-made electrical disturbance"?

Mr. Young: I am afraid that is beyond me.

Mr. Godfrey Nicholson: Will hon. Members be informed before either earthquakes or volcanic eruptions are induced?

NATIONAL FINANCE

Land Betterment

Mr. Craven-Ellis: asked the Chancellor of the Exchequer the estimated amount of annual betterment accruing to all land in the United Kingdom; and by


what amount annually would each member of the population benefit if all the land were publicly owned?

The Chancellor of the Exchequer (Sir Kingsley Wood): I regret that the information for which my hon. Friend asks is not available.

Mr. Craven-Ellis: Upon what basis did the Uthwatt Report recommend that a duty should be paid?

Sir K. Wood: I would refer my hon. Friend to the Report.

International Post-War Currency

Mr. Craven-Ellis: asked the Chancellor of the Exchequer whether he can make a statement on the Currency Conference which is proceeding in Washington; and will be publish the names of the British representatives attending?

Sir K. Wood: The meetings referred to form part of the further explanatory discussions on post-war monetary questions by experts to which I referred in my speech on 12th May. The official representative of the British Treasury who is stationed at Washington and experts from some other countries who happened to be there at the time also attended. Further expert discussions will continue and there is no fresh statement which I can usefully make at this time.

Sir G. Gibson: Have any countries other than the United States and this country submitted schemes such as the International Clearing House scheme?

Sir K. Wood: Perhaps my hon. Friend would put that Question on the Paper.

Small Savings

Sir William Davison: asked the Chancellor of the Exchequer the total sum saved since the commencement of the war in the purchase of National Savings Certificates and other small savings; and the proportion of such small savings to the total sum borrowed by the Government?

Sir K. Wood: With my hon. Friend's permission, I will circulate the figures in the Official Report.
Following are the figures:—Subscriptions to small savings from 3rd September, 1939, to 22nd June, 1943:




£ millions.


National Savings Certificates
860.3


Defence Bonds
604.5


Increase in balance due to depositors in the Post Office and Trustee Savings Banks
763



£2,227.8


Subscriptions to small savings, after allowing for repayments, accounted for 22 per cent. of total borrowings over the same period.

Court Awards (Income Tax Deduction)

Sir G. Jeffreys: asked the Chancellor of the Exchequer whether he is aware that, as a result of the existing law, all payments under court orders by husbands to wives are subject to income tax and that often the full tax of 10s. is deducted though the wife with a small income is not liable to pay the full amount; and whether, as it may take months to secure a refund from the Inland Revenue authorities during which period the wife may have to solicit public assistance, he will consider modifying the rigour of such official action at its start?

Sir K. Wood: I would refer my hon. and gallant Friend to my reply of 12th May to the hon. Member for West Nottingham (Mr. Hayday) on this subject, of which I am sending him a copy.

Sir G. Jeffreys: Is it not a great injustice that a woman whose proper rate of Income Tax may be something in the neighbourhood of 3s. 6d. has 10s. deducted and then has to apply to get repayment?

Sir K. Wood: In my reply to my hon. Friend I stated that arrangements, designed to avoid hardship in the type of cases mentioned in that question including arrangements for prompt repayment, after a short interval, of tax were already in operation.

Mr. Glenvil Hall: What does my right hon. Friend mean by a short interval—three months or less?

Sir K. Wood: I would not like to define that.

Mr. Hall: It is often several months.

Civil Service Pensions

Sir G. Jeffreys: asked the Chancellor of the Exchequer the nature of any reductions made since 1919 in the pensions of retired civil servants?

Sir K. Wood: As the answer is rather long, I will, with my hon. and gallant Friend's permission, circulate it in the
OFFICIAL REPORT.

Sir G. Jeffreys: Is it a fact that pensions of retired civil servants have not been in any way subjected to percentage deductions or stabilisation since 1919?

Sir K. Wood: I would prefer that my hon. and gallant Friend should examine the answer which I have given and then if necessary put down a further Question.

Following is the answer:

The only reductions in the pensions of retired civil servants since 1919 have been those resulting from the operation of a cost-of-living formula.

Between 1919 and 21st February, 1922, a proportion (reaching eventually 75 per cent.) of Civil Service bonus was reckoned for pension, but when the pension was once granted, no reduction was made. From 1922 to 1934 the whole of the bonus was reckoned for pension, but that part of the pension which was in respect of bonus was subject to variation quarterly by reference to the cost-of-living index figure, which fell during this period from 105 to. 50.

In 1934, following the consolidation of Civil Service bonus with salary at a rate appropriate to a cost-of-living figure of 55, existing pensions were dealt with on the same basis. That part of pension which was in respect of bonus was stabilised in relation to a cost-of-living figure of 55 and consolidated with the rest of the pension. There has been no reduction since that date.

The above information relates to persons drawing Civil Service cost-of-living bonus. The arrangements affecting persons drawing industrial (e.g., engineering, etc.) bonus were roughly similar.

Railings Removal (Compensation)

Sir W. Davison: asked the Chancellor of the Exchequer whether his attention has been called to the fact that, under Defence Regulation 50B, no provision is made for the payment of compensation in respect of the cost of replacement, during or after the war, of any iron railings removed by order of the Government for war purposes or for the provision of a substitute fence; and will steps be taken to amend the Order

so as to enable compensation to be paid to persons whose fences have been compulsorily removed?

Sir K. Wood: The answer to the first part of the Question is in the affirmative, and I would in general refer my hon. Friend to the answers given to him on 23rd June by my right hon. Friend the Parliamentary Secretary to the Ministry of Works. The terms of the Regulation were carefully considered before it was made and the Government do not contemplate its amendment in the manner suggested.

Sir W. Davison: Is not the present position under the Regulation comparable to a case where a man whose house has been removed for military considerations being paid for the bricks but not being paid anything towards the cost of the re-erection of the house; and how can my right hon. Friend justify paying no compensation to people who have to replace their fences with wood or some other material?

Sir K. Wood: I would not accept my hon. Friend's description of the matter, but he will see from the reply which was given by the Parliamentary Secretary to the Ministry of Works the basis upon which compensation has been paid.

Sir W. Davison: On the contrary, is not my right hon. Friend aware that the Minister said he was precluded from paying compensation in respect of the cost of reinstatement until the House of Commons varied the Order?

Sir K. Wood: No, the Parliamentary Secretary said compensation was payable in accordance with the terms of the Defence Regulation 50B.

Sir W. Davison: That is not so. He said it was for the House of Commons to alter the Order, and that meanwhile he had no power under the Order in its present form to pay compensation in respect of the cost of replacement of any fencing.

National Anti-Vaccination League (Income Tax)

Professor A. V. Hill: asked the Chancellor of the Exchequer whether the National Anti-Vaccination League is treated as a charitable organisation for purposes of assessment to Income Tax?

Sir K. Wood: I am afraid that I cannot answer my hon. Friend's Question, for the Commissioners of Inland Revenue are precluded from disclosing information regarding the Income Tax affairs of particular taxpayers.

Irish Workers, Great Britain (Remittances to Eire)

Mr. Wakefield: asked the Chancellor of the Exchequer whether he is aware that large sums of money are being remitted by Irish workers to Eire, which are being lost to British war savings and on which no tax has been paid; and what steps is he taking to prevent this export of sterling?

Sir K. Wood: I would refer my hon. Friend to the reply given on 15th October last to my hon. Friend the Member for Belfast University (Prof. Savory).

Professor Savory: Will the right hon. Gentleman see that Income Tax is paid upon the enormous wages earned and spent by citizens of Eire in this country, where they are holding up the farmers to ransom?

Sir K. Wood: I want to get in as much Income Tax as possible, but I am bound by the provisions of the Finance Act, 1926, as regards the Irish Free State.

Sir Adam Maitland: Is this not another reason why the Chancellor should consider a change in the imposition of the tax on workers' wages so as to tax them upon current earnings?

Sir K. Wood: I think that is rather dragging the matter too far.

Overseas Service Personnel (Duty-Free Parcels)

Mr. John Dugdale: asked the Chancellor of the Exchequer whether he will consider the possibility of allowing members of His Majesty's Forces serving overseas to send home a single parcel of a greater value than 30s. duty free provided that the total value of duty-free parcels sent in a year is not in excess of 120s.?

Sir K. Wood: I am afraid that my hon. Friend's suggestion is not practicable. It would involve the keeping of special records showing particulars of all parcels sent by every individual who took advantage of the gift parcels concession,

and such an expenditure of labour would not, I consider, be justified.

Mr. Dugdale: In view of the fact that a record must already be kept so as to know whether they have sent four parcels or more, can the right hon. Gentleman not use the same system of recording in connection with the suggestion I have made?

Sir K. Wood: No, Sir. The information I have is that to enable a check to be kept on the aggregate value of the parcels sent by an individual during the year it would be necessary to set up special records covering every member of the Forces who sent home any parcel.

Mr. Dugdale: Can the right hon. Gentleman say how the present record is kept?

Sir K. Wood: Yes, if my hon. Friend will put down a Question.

KNITTING WOOL (WINDING CONTRIVANCES)

Mr. Leach: asked the Minister of Supply whether he will consider issuing an instruction to spinners of knitting wool intended for household use that such yarn shall in future be made up on tubes, bobbins, cheeses or other contrivances which obviate rewinding and thereby save millions of hours of domestic labour annually?

The Parliamentary Secretary to the Ministry of Supply (Mr. Peat): The adoption of this suggestion would involve rewinding in the factory, for which I regret the additional labour is not available, and would also increase the cost of the wool.

Mr. Leach: Is the Minister not aware that no rewinding is necessary at all and that the yarn can go straight on to the tubes or bobbins or cheeses, with no extra cost?

Mr. Peat: That is not quite accurate. The wool has to be dyed, and you cannot dye wool on a bobbin or cheese or in a ball, and therefore if you have to rewind it after dyeing that does involve expense and labour.

Mr. Leach: Surely the Minister must be aware that he has been misinformed

PERSONAL STATEMENT

Mr. Frankel: I rise to make a personal explanation, In the OFFICIAL REPORT of last Thursday I am reported as having said in a supplementary Question:
Does the Minister know that this decision was reached on the advice of the hon. and medical Member for Southampton (Dr. Thomas)? "—[OFFICIAL REPORT, 24th June, 1943; col. 1289, Vol. 390.]
Inadvertently, the OFFICIAL REPORT misquoted me there. What I did say was:
Does the Minister know whether this decision was reached on the advice of the hon. and medical Member for Southampton (Dr. Thomas)?

NEW MEMBER SWORN

Sidney Shephard, Esquire, M.C., for the County of Nottingham (Newark Division).

MESSAGE FROM THE LORDS

That they have agreed to—

Telegraph Bill, without Amendment.

That they have passed a Bill intituled, "An Act to amend the Coal Act, 1938, and dissolve the Coal Mines National Industrial Board."—[Coal Bill [Lords].

BUSINESS OF THE HOUSE

Motion made, and Question proposed,
That the Third Reading of the Finance Bill may be taken immediately after the consideration of the Bill, as amended, notwithstanding the practice of the House as to the interval between the various stages of such a Bill."—[Mr. Eden.]

>Colonel Sir Charles MacAndrew: I feel that on a matter of this kind the Government ought to give the House some reason for what they are proposing. I do not know whether my right hon. Friend has looked at the Amendments, or whether he has looked at the Schedule which stands in the name of the Chancellor of the Exchequer, and there is an Amendment to that new Schedule. Over the week-end I consulted an eminent lawyer, who is a friend of mine, and the Schedule is, to him, quite incomprehensible. That being so, surely our usual custom of having separate days for the Report stage and the Third Reading of the Finance Bill ought to be followed unless there is some very good reason to the contrary.

Mr. Eden: No, Sir, I do not think so. When I explained last Thursday that it was proposed to follow this practice no suggestion was made that any exception should be taken to-day. It is exactly the same practice as we have followed for the last two years, and I can see at present no reason for varying it. If, of course, as the discussion proceeds, there is need to vary the practice in any way, that can be done; but I think it is reasonable now to ask the House to agree to the same arrangement as we have had in the last two years and which has worked quite well.

Sir C. MacAndrew: When was this Schedule in our hands?

Mr. Eden: Some days ago. I could not say exactly when.

Mr. A. Bevan: Surely the explanation given by the right hon. Gentleman is not sufficient. For the convenience of the Government two years ago the House consented to depart from what is a very useful tradition and practice. Because we have departed from that useful practice on three occasions the right hon. Gentleman thinks that we ought to have a reason for re-establishing the position and for not going on with this bad practice.


We ought now to have a positive reason why it is necessary to take the Third Reading of the Finance Bill on the same day as the Report stage.

Sir William Davison: Does not this show how very undesirable it is for the House to give way to representations from the Government upon occasions of alleged urgency, respecting practices which have been the rule here for many years? We are told, when the same matter comes up another year, that the Minister is only following the precedent of the previous year. It is very undesirable that any such precedent should be set up, and no reason given. A further point is that the Leader of the House forgot that when he mentioned this matter before this very complicated Motion in the name of the Chancellor was not before us, or even if it was, its contents had not been mastered by the House. The very fact that this complicated Motion has been put down is a very good reason in itself why more time should be given to Members to study it and for not taking the Third Reading immediately after the Report stage, when obviously Members would not have had time to give the consideration which is so very desirable.

Mr. Mander: It is very important to do all we can to maintain the ancient practices of the House of Commons, and whatever may be done on this occasion I hope that the right hon. Gentleman will bear in mind the importance of doing that, except when it is necessary for high reasons of policy connected with the war to rush through something as a matter of urgency. I trust also that he will bear in mind the feeling of the House on this occasion.

Mr. Bevan: May we have the reason, please?

Mr. Benson: I certainly hope that this Motion goes to a Division. I have no objection to the Chancellor of the Exchequer putting his Motion down, but what strikes me as very serious is the defence put forward by the Leader of the House. The mere fact that this has been done twice before appears to him to be an adequate reason why it should be done a third time. The House is always prepared to give way on a matter of urgent Government Business, particularly in war conditions, and in order to

facilitate such business to modify its traditions, but such modification is an ad hoc present to the Government and not the conferment of an established precedent. The Government are now apparently trying to turn this process or habit of taking the Report and the Third Reading stages consecutively into not only a precedent but an established order, and there is strong objection to it. It happens that there is very strong objection to it on this particular day, because of the complicated Motion put down in the name of the Chancellor of the Exchequer. It is not merely complicated but is very controversial, and to-day is one of the last occasions on which the process of consecutive Report and Third Reading stages should be proposed by the Chancellor of the Exchequer; but that it should be defended by the Leader of the House on the ground that we have already established a precedent seems to be an adequate reason why we should reject it.

Mr. Eden: I hope the House is not going to think that I wish to deprive it of long-established rights. That is certainly not my intention, and as Leader of the House it would be a very foolish practice for me to make any attempt of that kind. It is quite true that when, as a result of the Committee stage, only one Amendment was accepted, it became clear that if that Amendment had not been accepted, there would not even be a Report stage at all. That was the position as it then was, and I thought it not unreasonable to ask the House to follow the same practice as we had followed in the last two years. I certainly do not wish to insist upon this course against the wish of the House. I think we can do this to-day in the way I have suggested, but if the House feels otherwise, I am not going to press it against the wish of the House. Alternatively, there are two suggestions to make. The Motion I have moved is permissive, and if it is passed the Business may be taken in one day. If the House is willing to let the Motion be passed, and will have confidence in me as Leader of the House, and if I find, as the Business proceeds, that it is desired to have another day, I am prepared to arrange it with the Chancellor of the Exchequer. [Interruption.] I do not want to force it against the wish of the House, if the House is anxious on the subject of precedent, as I


can quite understand it may be. We do not wish to get into the position that because the House has given us a special power we take it year by year. I think we shall be wiser not to press this Motion, and therefore I shall ask leave to withdraw it.

Mr. Benson: The right hon. Gentleman is proposing to take not merely the Report and Third Reading stages but a Committee stage, because the Bill is being recommitted.

Earl Winterton: Has the right hon. Gentleman asked leave to withdraw the Motion?

Sir W. Davison: Is the Motion being withdrawn?

Mr. Eden: Yes. I beg to ask leave to withdraw the Motion.
Motion, by leave, withdrawn.

FINANCE BILL

Order for consideration, as amended, read.

Ordered,
That the Bill be re-committed to a Committee of the Whole House in respect of the Amendments in Clause 23, page 15, line 29, and page 16, lines 14. 25 and 26, standing on the Notice Paper in the name of Mr. Chancellor of the Exchequer."—[Sir Kingsley Wood.]

Bill accordingly considered in Committee.

[Major MILNER in the Chair]

CLAUSE 23.—(Disposal of company's stock at under value.)

The Attorney-General (Sir Donald Somervell): I beg to move, in page 15, line 29, at the end, to insert
and
(ii) where any person has (apart from this section) obtained financial benefits as aforesaid but only by reason of the transfer by him of shares which he did not obtain under any such transaction as aforesaid and he has not, apart from that transfer, been concerned in any such transaction as aforesaid, the direction shall apportion the said sum so that there is apportioned to him no greater part thereof than is equal to the amount by which he is, under subsection (4) of this section, deemed to have (apart from this section) financially benefited.
The general purpose of the Clause was discussed fairly fully in Committee, and I need therefore perhaps summarise very

shortly the series of transactions against which it is directed. The example cited was that of a company owning a stock of whisky, the shares of which were bought by A at a price well above what those shares would have fetched but for the scheme, the details of which I will now shortly develop. The shares were sold by A to B, and possibly by B to C at increasingly enhanced prices. The whisky was then sold to C at the stock pre-war price£I think in the example cited it was about £20,000. The property having passed to C, it was then sold on his behalf it still actually remaining in the company—for some £270,000, C having paid for the shares something intermediate between what I may call the normal value and a sum representing the value which it was hoped to realise.
As the Committee will see, the whole point of the scheme was to avoid the liability to Excess Profits Tax, which would have fallen on the company if the whisky had been sold by the company instead of in the way I have described. The Clause provided that the original shareholders who sold the shares and the various people denoted by letters of the alphabet who took part in the subsequent transaction, should come under a joint and several liability for a sum representing, in effect, the Excess Profits Tax which would have become payable if the whisky had been sold by the company. There was a provision in the Clause that the Special Commissioners could apportion that sum among all or any of those who came under the joint and several liability in the words in the Clause. On the point which is dealt with in this Amendment, it was our intention that if an original shareholder had taken no part in the transaction except to sell his shares, that the power of apportionment should be used so as to apportion to him what is described in the Clause as the excess value—the Committee will follow what that means—leaving the rest of the sum to be recovered from the other persons who had taken their part, and also taken the profits in the later stages of the transaction.
It was, however, pointed out to my right hon. Friend that it might be reasonable—particularly having regard to the fact that some of the shareholders at any rate, might not have realised that there was any sinister scheme in the background—to make that intention of appor-


tionment mandatory, and to provide that there should be an apportionment of the excess value to the original shareholders, or rather to any original shareholder who had not, in the words of the Amendment, "apart from that transfer"—that is the original transfer—"been concerned in the transaction." The effect of this Amendment is to provide that there shall be such an apportionment. It does not weaken the Clause, nor does it introduce any new principle. It simply makes mandatory that which it was my right hon. Friend's intention should be the procedure under the permissive power of apportionment.

Major Petherick: On a point of Order. During the Committee stage we discussed this matter generally, by taking several Amendments together. Would it be possible on this occasion to take the Amendments on this point together, and to discuss the general principle?

The Attorney-General: I am quite willing to follow that course, which perhaps I should have suggested to the Committee at the outset.

The Chairman: If it is the general feeling of the Committee, the Amendments can be taken together.

The Attorney-General: I will now pass to the second Amendment on the Paper, which is somewhat similar in its general effect to that which I have already explained. In the Committee discussion, it was pointed out that the necessarily wide words used in the Clause defining the persons who would come under the joint and several liability might cover professional persons and bankers whose part had merely been to give professional advice or to draw up documents or statements for the ordinary fees payable for such services. The case was mentioned, in particular, of a bank or banking institution which might have advanced money and which might have had no knowledge of the purpose for which the money was intended to be used, merely advancing it at whatever was the proper rate of interest or on the security which would normally be offered in a transaction of that kind. It was suggested it would be wrong to put such persons in jeopardy of a joint and several liability which, in some of these

cases, might run into six figures when that was the only part which they had played in the transaction. Of course, it was never my right hon. Friend's intention that the Special Commissioners should use this drastic power of joint and several liability to bring in, as responsible for the major sum or any substantial proportion of it, persons of this kind. Those whom we want to get at are the people who have really shared in the excess sum.

Earl Winterton: Before my right hon. and learned Friend leaves that point would he, in view of what he has just said, explain why in the previous discussion the Chancellor of the Exchequer used these words:
Any banker must be an awful fool not to be, at any rate, put on his guard to make proper inquiries. … Anybody who has seen any of these transactions must have the greatest difficulty in finding any appearance of innocence."—[OFFICIAL REPORT, 22nd June, 1943; col. 322, Vol. 390.]
I understand that my right hon. and learned Friend is now taking a diametrically opposite line of argument in saying that the banker may be quite innocent in the matter.

The Attorney-General: I will do my best to explain. It might well be that people who advanced money, whether banking institutions or otherwise, in connection with such a transaction would be found to be in the scheme, and, if so, they would not get the advantage of the Clause, Only if they can satisfy the Commissioners that in fact this was a loan for which they received nothing more than the normal rate of interest, will they get the advantage of the Clause. I am inclined to agree with what my right hon. Friend the Chancellor of the Exchequer said, that there may be no case in which a banking institution which has lent money will not have been getting something out of it larger than the normal rate of interest. I think that when the point was put perhaps as a somewhat theoretical possibility that a banking institution might have made a loan, receiving merely an ordinary rate of interest, it was difficult to resist a demand that the Clause should make clear that if it does exist, such a transaction should not bring the institution under this very drastic liability. I hope therefore that these two Amendments, which really make mandatory what was my right hon.


Friend's intention as to how the Clause should be worked, will commend themselves to the Committee and will put an end to apprehensions which might have existed that there were cases in which the joint and several liabilities might theoretically be capable of being used oppressively in a way which the House would not desire.
The last two Amendments deal with points of procedure, and I think it might be more convenient to deal with them separately.

Mr. Woodburn: With regard to this question of bank interest, let us assume that a bank lent £1,000,000 for a fake transaction of this kind and drew interest on that fake transaction. Is not that interest equally culpable with the other parts of the profit?

The Attorney-General: I think they would not be able to satisfy the words of the Clause that
a person who carries on a banking business shall not be treated as having obtained financial benefits by reason only that he received interest at not more than the normal rate on a loan made by him in connection with any such transaction.

Mr. Graham White: I am very glad indeed that the Government have moved these Amendments. So far as I understand the situation they go part of the way, if not the whole way, to remove the anxieties legitimately felt by those who have studied this Clause, and to which they have given expression in previous Debates. The Attorney-General said that as the Clause now stands it does not create any precedent or new position. I am a little doubtful about that. It seems to me there is in this Clause an instrument whereby some entirely innocent person may be made to suffer for a transaction of which he is entirely unaware. It seems that that remains. If that is so, I think it had better be acknowledged that that is the case, so that we know exactly where we stand with regard to the Clause.
I am bound to say that the more I look at the Clause the more difficult it seems to me to carry out. Take the case of two brothers who may have bought shares, quite unaware of any transaction of an illicit nature. One sells his shares and thereby may become liable to an apportionment. The other does not and is not

so liable. One may have bought the shares attracted by the prospect of a profit, while the other may be thinking of the future and retains them as a permanent investment. It is not until the holder dies that my right hon. Friend comes in. Yet here is an increment due to this transaction. It does seem to be a most complicated business and unavailable business.
Having said that, there is one question I should like to ask, that is, whether the number of persons or professions for which protection is offered by this Clause is sufficiently wide. In addition to barristers, solicitors and accountants, there are a number of others who might be included, such as brokers who might, in the course of their legitimate business, find themselves within the scope of this Clause. I am not quite clear as to whether in line 9 words are not set out which would give some protection to persons who although not barristers, solicitors or accountants, nevertheless in the legitimate course of their business bring themselves within the scope of these transactions. I would be glad if the Attorney-General would clear up that point.
I would refer to an observation made by my right hon. Friend the Chancellor of the Exchequer in the course of the previous discussion. If I may do so without laying myself open to the charge of being a prig, I think it is most unseemly that the time of Parliament, the Chancellor of the Exchequer and the Board of Inland Revenue should be occupied by discussions of this kind in the middle of a war. Nobody likes this Clause, and I hope that the advertisement given to it by this discussion may lead to the fact that it may never have to be brought into operation. That would be the best thing. At all periods in our history we may have had pirates and people who preyed on the community, who stole ships and sailed the high seas and took other people's property or who took to the woods and sallied out on inoffensive travellers. In these days apparently the buccaneers go into the City and, by these nefarious transactions, seek to avoid the liabilities which the rest of the community in honour bound accept in war-time.
I think it is entirely wrong that so much time of the Board of Inland Revenue should be taken up with this kind of thing. It is entirely wrong that so much time should be spent by the Treasury and the Board of Inland


Revenue finding out what the facts are about this and other business accounts. It is not to the Finance Bill that we should look for the remedy for this kind of thing, but perhaps by an Amendment of the company laws and arrangements for greater publicity of accounts. It would be a great help to business and everybody in this country if all the cards of our commercial transactions could be put upon the table face upwards. These difficulties would disappear. I hope attention may be given to this aspect of the matter. I hope the publicity which has been given to this question will rouse public attention and will have touched the consciences of those who have thought it proper to indulge in despicable practices of this kind.

Mr. Craik Henderson: I think the whole Committee will welcome the Amendments by the Chancellor of the Exchequer, which have gone a long way to remedying the legitimate fears of the effect of this Clause. I can speak frankly on this, because I was one of the persons who originally drew the Chancellor's attention to this particular ramp. Like all other Members I am anxious to see the wrongdoer punished, and punished severely, and my only regret about this Clause as it now stands is that I am still afraid that the real wrongdoer will escape and will not be sufficiently punished. I would like also to be assured that the innocent party will not suffer, because to my mind it still appears that under the Clause, even with these Amendments, he may be penalised.
I would like to clear up a point and find out whether the Chancellor or the learned Attorney-General agrees. The point is that in all these transactions there is normally an innocent party. The Solicitor-General, in the Committee stage reported in the OFFICIAL REPORT of 2nd June, 1943, at cols. 307 and 308, referred to particulars of a case which I have identified. The learned Solicitor-General said that the purpose was clearly the avoidance of liability to tax. That was true of some of the subsequent purchasers, but according to the Special Commissioners was not true of the original vendor. In that particular case, in the opinion of the Special Commissioners, there were some people engaged far down the line who were out to evade Excess Profits Tax, but the original

vendors were absolutely innocent. In the Report, the Special Commissioners say:
Having heard the evidence, we are satisfied that so far as the Rosses and Ross and Coulter are concerned the sale by them of their shares in the Company to Mr. Hogg was a bonâfide sale unconnected with any consideration of evading Excess Profits Tax and that they know nothing of the other persons involved in the subsequent transaction.
These people were innocent, but some subsequent purchasers undoubtedly were carrying out the scheme with the intention of evading Excess Profits Tax. I want to be satisfied that people who have no guilty intention will not be punished, but that people who have a guilty intention will be severely punished. I may be wrong, but as I read Clause 23, in certain circumstances, which I do not need to detail, the Commissioners may direct
that such sum as may be specified in the direction, being the sum which, in the opinion of the Commissioners, is equal to the full tax, shall be chargeable by way of excess profits tax …
Under Sub-section 4 (b) it is provided— and this is the crux of the whole matter:
the persons transferring the shares be deemed to have financially benefited if they did not obtain the shares under any such transaction as aforesaid, to the extent by which the consideration which they obtained for the shares is greater than it might have been expected to be if the stock had been sold by the company immediately before the transfer in such circumstances that the full tax became payable by or in respect of the company.
Now the effect of these two provisions is to penalise an innocent vendor by treating the stock as if it had all been sold immediately before the transfer instead of over a period of years. Let me give an example. Let us say that an innocent vendor owns practically the whole capital of a company, amounting to £100,000. The company have on their books a certain quantity of whisky, valued in the books at £20,000, but possessing a market value at the moment of £100,000. Someone offers to buy the shares of the company. The shares are sold for £100,000, the vendor knowing nothing of the course which is to be taken five or six stages down. That whisky in the normal course would not have been sold in one year, but the sale would have been spread over three, four, or five years. But someone well down the line proceeds to sell the


whisky at below the market price, and immediately the whole transaction comes within the Act. Under Clause 23 a direction can be given for the full amount of the E.P.T. on the assumption that it was all sold in one year. Suppose the standard of £20,000. There may be a tremendous excess. That it was all sold in one year is not a fair assumption to make in the circumstances. The man was selling his whisky in a perfectly normal way. He may have got slightly more because of the circumstances, but because of Clause 23 he is found liable for a sum greatly in excess of any financial gain he may have made.
I would particularly ask the Chancellor and the Attorney-General to keep in view the very serious problem which would arise for trustees. Trustees for the deceased holder of a large block of shares in a company have to raise money to pay Estate Duty. They have no option but to sell. If someone, a way down the line, enters into a transaction with the objection of evading taxation, the trustees will automatically be found liable for a considerable sum, for which I submit there is no moral justification. May I give an example of a case? I do not know the facts personally, but the correspondent who gave them to me is a very reliable professional man. This is the case of a whisky concern, the shares of which were practically all owned by a very old man of 74 years of age, in a very precarious state of health. He was left alone to manage his business, his son having been on war service since the outbreak of war. Most of his staff were called up. About 18 months ago an offer was received for the shares of the company. He consented to sell, with one proviso, that the company's customers would be continued. He had no knowledge of any ramp or anything of that kind; he was simply an old man who could not carry on because his son was on service and his staff had been called up. It was only after everything was signed that he got some inkling of what was happening. He then tried to get out of the transaction, but was held to the contract. This man will be penalised very considerably. Is this fair?

Earl Winterton: On the last occasion when we discussed this Clause a certain amount of heat was engendered, for which I and my hon. Friend the Member for South Croydon (Sir H. Williams) were

partly responsible. I want to make it quite clear that I make no charge against any of my hon. Friends opposite of having any sympathy with illegal transactions. The same applies to my hon. Friend the Member for East Birkenhead (Mr. Graham White). No one who knows his parliamentary career will have any idea that he has any such sympathies. But I am still more convinced than I was before that my hon. Friends do not realise the seriousness of the situation, to which the Chancellor gave full expression in the last Debate. I hope that the hon. Member for North East Leeds (Mr. Craik Henderson) will not think there is the slightest personal reference when I say that for a long time past in certain business circles it has been a matter of notoriety that persons in the whisky trade have been making profits at the expense of the Chancellor of the Exchequer.

Mr. Craik Henderson: rose—

Earl Winterton: No; let me finish what I was going to say. That has been a matter of notoriety for a long time past. I am sure that no one in this House would have the slightest sympathy with such people, but it was the case of a whisky firm that was given by the hon. Gentleman. On the last occasion there was considerable support for this Clause, and some opposition to it. My right hon. Friend—probably, I hope I may say without conceit, encouraged by the strong support he had from several of us, irrespective of party—made one of the strongest speeches he has made in support of any Clause of the whole Bill. He said:
I am bound to say that I hope these observations of mine will not foster any hopes that I may deal with this Clause in such a way as to show any weakening in the Government's attitude. This concerns—
I ask the Committee to note this—
not only one transaction. I regret to say there have been a number of transactions of this kind. It is, I think, a disgrace that people should, at this time of all others, lend themselves to transactions of this character. I am surprised that more members of the Committee have not got up to suggest that instead of a civil penalty some criminal penalty should be imposed.
Those were the Chancellor's words on that occasion. Now, not only does he bring forward no proposals for a criminal penalty, but he has, I submit, decreased the chances of a civil penalty being imposed. He went on to say:


There is a great deal to be said for that, because this is very much akin to a black market offence. It is an endeavour to make money in a way that I think must be abhorrent to all.
It would be unfair if I did not quote his next sentence:
Equally we must not be led away by our feelings to do anything unfair or anything calculated to bring misfortune on innocent people."—[OFFICIAL REPORT, 2nd June, 1943; cols. 321–2, Vol. 390.]
With that we are all in agreement. [HON. MEMBERS: "Oh!"] Certainly we are all in agreement. [Interruption.] I am not going to give way. Hon. Members who have just come into the House seem to think that Debates can be carried on by getting up and interrupting. The hon. Member can speak afterwards. I have said that 1 do not accuse anyone opposite of being in any way sympathetic to this transaction. I assert that those of us who supported the Clause as it stood, equally do not want to harm innocent persons. Where we differ is as to what constitutes an innocent person. Do not let us think, because there is only a handful of people in the Committee, and because this is a recommitted Clause, that there is not considerable interest taken in it outside. There is considerable interest in it from the point of view of people who will say "Has not there been undue tenderness shown to certain people?" And from the point of view of people who think they may be regarded as innocent people. I confess that I was astonished to see the new Amendment. I took part in no discussions on the matter. I deliberately refrained from taking part in such discussions because, although it may be an odd line to take these days, when everybody's idea is to be as matey as possible, when I reach a conclusion I usually stick to it. I took no part in discussions on the matter because I had every reason to think that the Chancellor meant what he said and would not give way. I think the Attorney-General will be in rather a difficulty, because the Chancellor has receded very much from the position he took up last time.
Let us consider the case of the alleged innocent person. I do not wish to oppose the Clause in a Division. I am satisfied that the decision which the right hon. Gentleman has made is because he is now convinced he was wrong in the first instance, and that what he said on the

Committee stage really did not conform to what he meant. As I understand the position — and the learned Attorney-General will contradict me if I am wrong—any solicitor, accountant, barrister or banker who takes part in these transactions without knowing that they are of a character intended to defraud the Revenue—I wish we could use the words "criminal character" because by any meaning of the word "criminal" they are criminal transactions. Any man in this country who seeks to defraud the Revenue is committing a criminal act, and if any hon. Members deny that, let them get up and say so. They will not be returned at the next election if they do. It is indeed a criminal act in the general sense of the term. As I understand the Amendment, any solicitor, barrister, accountant or banker who takes part in these transactions and who does not know that they are of a criminal character will not have to pay any penalty of any sort. That as it stands may seem reasonable enough, but is it reasonable enough when you come to think about it? I prefer to stick to the words which I have already quoted when the Attorney-General was good enough to give way.
Any banker must be an awful fool"—
It is no use hon. Members shaking their heads. This is what the Chancellor said:
Any banker must be an awful fool not to be, at any rate, put on his guard to make proper inquiries."—[OFFICIAL, REPORT, 2nd June, 1943; col. 322, vol. 390.]
But there is nothing in the new Amendment to say that he must make proper inquiries. I understand that provided he does not make any more than the normal inquiries, and is not actually acquainted with the fact that the transactions are calculated to defraud the Revenue, he gets off scot free. There may be technical reasons for this. It may be that the right hon. Gentleman's advisers have told him that that is so, and it may be right, but I hope that he has riot done it because of any pressure from any person either inside or outside this House. It may be that his technical advisers have told him that he has sufficient power to deal with these people—auditors, solicitors, accountants and the rest of them—if they act wrongly. I hope that that is so, but I am very much afraid that it will enable the continuance of a system that everyone knows exists at the present time. I quoted that on the last occasion. I have


not had a single letter contradicting that fact. It was fairly well reported in the Press in several of the popular newspapers. I said that there was a class of person, very few in proportion to their general numbers, who disgraced three honourable professions — barristers, solicitors and accountants, who spent their time encouraging tax dodgers or assisting them to evade taxation. Nobody has denied that because nobody can deny it. We all know that it exists. These people will be greatly encouraged by what was said both by the Attorney-General and the hon. Gentleman. Of course they will not be such fools as to make inquiries. A man comes along and says, "I am having transactions in
whisky." They do not inquire. If a prosecution takes place, provided they have no actual knowledge of the transaction, as I understand it—and the Attorney-General will correct me if I am wrong—and provided they do not get more than the normal rate of interest or remuneration they can carry on as before. The Chancellor of the Exchequer knows Treasury business best. If he does not want to deal with these people I have no more to say. I hope that he will keep a close watch on the situation.
I would say to the right hon. Gentleman that feel—one must not attribute motives in this matter—that he has allowed his mind to be entirely influenced in this matter. I believe his original statement. I do not think that any hardship would be caused to any innocent person. I expect that he thinks that it would be so. I hope that he is not being subjected to pressure either outside or anywhere else. I have a good deal of support here and outside when I say that, if it should be found that the Clause, as amended, is weakened and is not sufficient to deal with these transactions which the Chancellor of the Exchequer has told us, with all the authority at his disposal, are by no means single and that there has been a great number, I hope that next year, when the Finance Bill comes up in Committee, he will not say that so-and-so is going to be hit. A few people have to be hit in war time—you cannot help it—and it is better that a few should suffer than that the criminal should defraud the Revenue. There will always be some people who will say, "I will not inquire into these transactions.

Do not tell me anything, I will assume that they are perfectly legitimate."

Mr. Woodburn: I would like to follow up the point I put in a question which was very well argued by the Noble Lord the Member for Horsham and Worthing (Earl Winterton). It appears that there is not sufficient precaution taken in this Amendment to avoid making such a wide net for a very large number of people who apparently innocently, but in reality have corruptly assisted these transactions. These speculators in this type of black market depend very largely sometimes for their money to carry out these transactions upon loans. If they borrow the money from some lender on the pretext that it is an innocent transaction, the lender himself may make a very big profit out of what is clearly a criminal transaction. It would be monstrous if these, what might be called sitters behind the scenes, were to get away with profits while the more innocent are to be punished. The most guilty person is the one who facilitates the crime, even more so than the person who commits it. If these people investigate the purposes for which loans are granted do not carry out a legitimate investigation and then pretend to be innocent, they appear, according to this Amendment, to escape free. There ought to be something put into the Amendment to say that for the purposes of the Section, unless the person concerned could satisfy the Commissioners that he took all reasonable precautions to investigate the proposed transactions, he could not have absolution from the liabilities involved. All money which comes from a criminal transaction should be impounded by the Treasury. The hon. and learned Member who spoke at the beginning of the Debate raised the question of ignorance of what was taking place. There are many people in this country who are punished because they are expected to know the law. They do a thing innocently, but innocence is not taken as guiltlessness.

Mr. Craik Henderson: I think there is a very great distinction between the ordinary person who can be punished because he is expected to know the law and the case here, which is quite a different case. When a transaction takes place nothing has happened. When an offence is committed it is by people of whom nothing was known at the time.

Mr. Woodburn: Nobody would Want a person to be punished, but the point is that, if the Chancellor gives away his power to punish a person, the power to deal with such persons is considerably weakened. There is considerable diminution in the power to deter criminals under the present Amendment, and it will be assisting criminals if it goes through as it stands. The words that the Attorney-General read out did not seem to provide any barrier or protection at all against that happening. If the Chancellor keeps his powers in as strong a form as possible people who deliberately set out to advise others to avoid Income Tax, even though they only charge a fee, who are as much a party to the conspiracy, will be more careful and the so-called black marketeer will not be able to indulge in such transactions because he will not know the law sufficiently well to do it. The person who advises him is the person who makes his crime. Therefore, the Chancellor of the Exchequer or the Attorney-General ought to put something in the Amendment which will reserve to them the power to decide what is corrupt and what is innocent. There are analogies for this. In the election law the difference between legal practice and corrupt practice is made very clear. It is for the courts to judge whether a thing is done corruptly or not. I am satisfied that no court in this country will ever adjudicate a thing to be corrupt if it is satisfied a person is innocent. Therefore, the question of corruption ought to be introduced here to the effect that if an action was done without taking proper precautions and making the necessary investigations as to the purpose of a loan, such a person should render himself liable. If that were done a person would take care that he did not involve himself in any such action and much of the money available for these occasions would cease to be available and you would stop crime before it started.

Major Petheriek: The hon. Member has expressed his fear lest the Amendment may open the door rather wide, but he did not give any indication of the wording to carry out what he prefers. May I refer to the speech of the noble Lord which was couched in somewhat violent terms and was unnecessarily violent? He was good enough, it is true, to refrain

from suggesting that those who on the Committee stage considered the Bill was too widely drafted were actuated by evil motives and did not wish to stop the black market, which was all to the good, but none the less he took up, I think, a wholly wrong line on this particular case. He and one or two other hon. Members on the Committee stage of the Bill suggested that in effect the Government, the country and the House of Commons were so anxious to protect members of the black market that it did not matter how widely the net was drawn. My hon. Friend the Member for North-East Leeds (Mr. Craik Henderson) endeavoured to interrupt the noble Lord and he refused to give way, as he did to me on the Committee stage, but he himself interrupted the Attorney-General in the middle of his speech to-day. I do not wish to be unkind, but he thinks that he is free to interrupt hon. Members in the course of their speeches and claims to be allowed to make his own speech in full without any interruption at all. I understand that my hon. and learned Friend wished to interrupt to point out to the noble Lord that in this whisky case—we have been talking a great deal about whisky and other kinds of commodities might be involved and guilty persons concerned in the transaction—the Commissioners, in paragraph 9 of the statement of their decision, said:
Having heard the evidence of Mr. Herbert Ross we are satisfied that, so far as the Rosses and Ross and Coulter are concerned the sale by them of their shares in the company to Mr. Hogg was a bona fide sale, unconnected with any consideration of avoiding E.P.T. and that they knew nothing of the other persons involved in the subsequent transactions.
Suppose the Noble Lord—if I may use an un-Parliamentary expression—had been Mr. Herbert Ross instead of Lord Winterton and he had been mulcted of large sums although he was an innocent person. We took the view on the Committee stage of this Bill that it was wrong to throw the net so wide that it caught the perfectly innocent people as well as the guilty. I believe this is an example of the working of the Parliamentary system at its best. The Government rightly wish to catch certain persons engaged in the black market. In order to do this, they put down a Clause on the advice of their legal advisers and Parliamentary draftsmen, a Clause which they thought was sound. When it came up for examination in the House of Com-


mons many persons outside pointed out to Members—as happened in my case—that absolutely innocent people might become involved, quite unwillingly, in transactions at some point in a transaction. On the Committe stage the Government defended their Clause as originally drafted, but said they would have another look at it, and now they have come to the conclusion that it was too widely drawn. Everybody is anxious to stop the black market in its various forms, but what we are anxious to do as Members of the House of Commons is to see that innocent persons do not, behind these stringent methods, get mulcted in fines or imprisoned for offences which they have not committed or which, if they have committed them, they have done so entirely innocently. I welcome the Amendment which has been put down, and I hope the Committee will realise the reasonableness of what the Government are doing.

Dr. Russell Thomas: I will not keep the Committee for more than a few minutes, but I, too, would like to refer to the speech of the Noble Lord the Member for Horsham and Worthing (Earl Winterton). I note that he rebuked the hon. Member for The Wrekin (Mr. Colegate) by saying that new Members are far too fond of getting up on their feet and interrupting. I would remind the Noble Lord that they merely follow the example which he so badly sets. I observe that he is not listening now, but perhaps he will read in the OFFICIAL REPORT what I have just said. I certainly will not repeat it, as he wishes, for his benefit now. The Noble Lord enunciated a doctrine which is disastrous and which I very much deplore. He said that it did not matter if a few innocent people suffered, or words to that effect. That was the sum total of what he said. Well, if we all thought as the Noble Lord thinks on that point I, for one, would not want to continue fighting this war. We want to sustain the form of society in which the innocent should always be protected against any form of what my hon. Friends opposite always call Fascism. The Noble Lord seems to be joining the legion of dictators which are so numerous both in this country and throughout Europe.
Now I want to bring the Committee back to the seriousness of the Clause itself,

because I was one of the leaders of the agitation against it, not from any ulterior motive but from the purest, because I felt that it was loosely and obscurely drawn. The object of the draftsmanship of the Clause should be that it should catch the guilty while leaving the innocent outside the net. I much appreciate the gesture of the Chancellor of the Exchequer in meeting us to-day. I do not pretend that the Amendment is perfect, but, nevertheless, it goes some way towards meeting us in this respect. I regret that some hon. Members opposite have taken bhe view that they have taken in this matter. I believe that if the learned Solicitor-General had not brought up the whisky case, which tended to prejudice their minds, they would not have adopted the attitude they have shown throughout. They forget the old maxim, "Hard cases make bad law." The hon. Member for East Stirling (Mr. Woodburn) talked about barristers and solicitors being involved, but we must surely by no means interfere with the confidential and sacred relationship between client and solicitor, and solicitor and barrister, which cannot be challenged in a court of law. I can go to my solicitor and tell him anything without fear even if it being incriminatory. That has always been recognised as one of the finest principles in the administration of justice. The hon. Member attacks, to use the phrase I used in the Committee stage, the citadel of liberty itself.
I was interested in the pontifical speech of the hon. Member for East Birkenhead (Mr. Graham White), who suggested that these guilty people should not be allowed to exist. If the hon. Member has the experience of life which I should have thought he has, he must know that this sort of people do exist in society, in every occupation and every profession. It is useless for him to talk in the high priestly way he did to-day—time must be spent in drafting clauses to deal with them. I agree with the hon. and gallant Member for Penryn and Falmouth (Major Petherick) that this Debate shows the Parliamentary institution at its best. It also shows the attitude of mind of certain Members of Parliament like the Noble Lord, who do not appear to be so democratic and so moved by the interests of justice as they always will pretend. I hope the Committee will accept the Amendment which has been brought forward by the Chancellor.

Mr. Denman: I would like to recall the Committee to the purpose of our discussion, which is to find the right size of mesh for the net which is to catch the villains and let out those who are innocent. In doing that, I must, after the attack which has been made by the hon. Member for Southampton (Dr. Russell Thomas), express the debt that the Committee feels now, and which it felt on a previous occasion, to my Noble Friend the Member for Horsham and Worthing (Earl Winterton), who has expressed most excellently the view that we must not do anything to make it easier for those who attempt to evade tax law. One question is whether the Amendment does not go too far. I think the hon. Member for East Stirling (Mr. Woodburn) made an extremely good case, one which I would like to have made myself. There are solicitors and accountants who make it their chief task to advise clients on tax avoidance and how this can be done in most ingenious ways. These methods do not occur to the normal business man, who has not the knowledge or time at his disposal. It does not occur to him that there are these possible ways of escape. Does this Clause unduly release these advisers on methods of tax avoidance instead of catching them as: they were caught by the original Clause? My Noble Friend, in interpreting this Amendment, implied that these people would not escape if they knew that the purpose of the transaction was to avoid E.P.T. I do not see anything in the wording of the Clause against that limitation. It seems to me a question of whether they are conscious of an offending purpose or not. If they disclose, I suggest that words might be added to make it clear that they are withdrawn from the main Clause only if they disclose that the purpose of the transaction was to escape liability for tax. I make that practical suggestion, and I hope it will be carefully considered.

Mr. Benson: This Clause is an excellent example of the difficulty we are always in, and always shall be, in dealing with tax evasion so long as we deal with it by the process of narrow definition as to what is and what is not a taxable subject. So long as we have to define clearly and definitely what is taxable and what is not and so long as the Commissioners of Inland Revenue have to decide whether a particular sum of money comes inside or outside a given

group of definitions, then it will always be necessary for us to put in some safeguard for the private individual. I have no objection to the Amendment which the Chancellor has brought forward to give protection to the private individual. We shall only be able to avoid the need for the protection of individuals if and when it is found possible to hand over to the Commissioners of Inland Revenue or some special committee power to look behind the form of transaction in order to decide whether evasion was the intention. Hitherto, we have never adopted that policy, but our law has become so complicated, particularly in regard to Surtax, that sooner or later we may have to drop the practice of depending on rigid definition and have to give discretion to some body of persons to look behind our definition and to the intention. That, I know, may be difficult The hon. Member for Central Leeds (Mr. Denman) referred to the possibility of dragging into this Clause the lawyer who designs and originates methods of tax evasion. In no circumstances could that lawyer be dragged in for that particular offence. A lawyer or a banker is dragged in only if he has been a party to the machinery, as apart from the design, of the transaction. There are so many transactions of a border-line nature that for a lawyer to be held criminally responsible for giving advice, even of a subversive nature, would be a very serious step for the House to take.

Mr. Colegate: As one of the original movers of the Amendment on which this subject was discussed, I should like to say how much I welcome these Amendments. Undoubtedly the original Clause —we may be certain of it since these Amendments have been brought forward—brought a number of innocent people within the danger of being dealt with severely for a crime which they had neither the knowledge nor the intention of committing. I have been strongly confirmed in the attitude that I took up in the original Debate by these Amendments and also by the speech of the Noble Lord who put forward the extraordinary doctrine that a few innocent people suffering did not really matter at all. In fact, had he applied his argument further, he would have shown that it would be better to abolish trial by jury in the case of particularly atrocious murders. He did


not confine himself to the arguments which we used for protecting the innocent. He confined himself to attacking the original crime in which we were all with him. It is true that he added a discourteous sneer at some of us for not having been for very long Members of the House, but the Noble Lord has been a Member for so long that he ought to know by this time that a sneer of that kind is utterly unworthy of one who sits on the Front bench and takes every advantage of it to interrupt. I am sorry he has absented himself when he must have known that I would reply to his sneer. The object that we had in moving this was to protect innocent people, and it is very clear that that is necessary because the hon. Member for East Sterling (Mr. Woodburn) even talked about the position of solicitors giving advice. If he looks at his words in Hansard, he will see that according to him a solicitor or barrister who defends a murderer deserves to be punished if his client is convicted.

Mr. Woodburn: A solicitor or barrister who defends a murderer is carrying out the law of the land in giving everyone the right to equal defence and equal trial. A person who takes part in a conspiracy to defraud the Treasury is corrupt and is a party to breaking the law, and he ought to be punished.

Mr. Colegate: That is exactly the point. We want those who take part in a corrupt conspiracy to be punished. But no solicitor who is consulted by anyone, even if that person unknown to him may intend to commit a crime, should be in any danger whatever of being brought under the penalties for that crime. That is what we have secured by this Amendment. I think it will be seen that the position of those who are anxious, as we are, that the criminal should be punished, so far from having been weakened, has been made very much stronger. If you want to punish anyone, you always make your position stronger if you run no risk of attacking the innocent. Many people who might under the original Clause have been somewhat doubtful as to proceeding with the utmost severity against the original criminal because they might involve innocent people can under the Amendment see the road clear to press with all severity against the criminal because we now know that no innocent person will be included.

I therefore thank the Chancellor of the Exchequer for the way he has met us.

Mr. Pethick-Lawrence: I think this Debate is one of considerable importance, affecting, as it does, in the first instance the particular question that we have under discussion, and having a very much wider bearing. I am not going to enter into the discussion raised by the last speaker, but I am not quite sure that he is right in law, and perhaps the Attorney-General will consider the matter. A barrister or solicitor who assists a person who may or may not have committed a crime may not be liable, but if a person, wanting to commit a crime, went to a lawyer in advance to find out how he could do it, and came less badly off as the result, I am not quite so sure that the lawyer who gave him advice in that way would not be an accessory before the fact.
Coming to the main issue, I would make a considerable distinction between the two Amendments that we are discussing. I think the first is in every way commendable. It is only right that a person whose innocence in this transaction cannot be disputed should not have to pay back more to the Exchequer than he has reaped as an advantage through his innocent partaking in a transaction which in itself was dishonourable. The Clause as it originally stood made it possible that a perfectly innocent person might have to pay back a great deal more than he had gained in advantage. So far as that is concerned, I do not think anyone could take any exception to that Amendment. With regard to the second, I feel a little less happy. We all know that these devices are put up to individuals—laymen.—by professional people, and this Clause seems to give carte blanche to dishonourable professional people to go ahead with their nefarious trade. It is true that under the Clause as it originally stood they might have been mulcted to a very much greater extent than any pecuniary advantage that they reaped because transactions involve hundreds of thousands of pounds, possibly even more, and I do not suppose the fees of these people would run into very large figures. On the other hand, I hope it is clear that a professional person who is given a nice little sum, £1,000 or £2,000 it may be, or even more, for very useful advice which the promoters hoped would render them immune from


E.P.T. will not get away with that swag and that the word "such" in the fourth line—" any such transaction "—could not be construed to mean that when he gave shady advice of this kind he usually got £2,000 or £3,000 as a pourboire. I take it that it means advice for which in the ordinary course he would earn a reasonable and modest fee. If that is understood, it is true that the matter is really hardly worth worrying about. If it is only £20 or £30, whether he is to take a share of that is not important, but the risk was that a man getting £20 or £30 for giving this undesirable advice might have had to pay tens of thousands of pounds.
Some people have talked about this being a penal Clause. That word is used rather vaguely in popular language. As I understand it, it is not a penal Clause. It is an attempt to recover money which ought to have been paid. Perhaps it takes on a penal character if someone who had only a small part of the swag, owing to the words "joint and several," should have to pay a very much larger proportion, but I do not think in the main that is going to happen. Therefore, rather reluctantly, I am not disposed to quarrel with the second Amendment, though I think we shall have to wait and see whether it lets people off who ought not to have been let off. I hope it will be very carefully construed. A bank which lends perhaps £1,000,000 to someone who has no money at all must really know that that money is going to be nefariously used and I hope it will not get away with the 5 per cent. which may be the normal transaction of a somewhat speculative character by a rather loose construction of the Clause. If it is found that there are professional persons or banks who are getting away with it on those lines, I hope the Chancellor will come to the House for a strengthening Clause for future use.
Beyond that—and I hope, Mr. Williams, you will allow me to go to this further extent, because it arises directly out of this matter—I think that this Clause and the necessity for it arouse in the minds of many of us doubts whether our legislation with regard to tax avoidance really is quite strong enough. The time may come when we ought to be in a position to consider the extension of

the idea of fraud from merely defrauding individuals to defrauding the State under conditions that, though not exactly illegal, are nevertheless intentional avoidance and evasion of payments which other individuals are forced to meet. It would be out of Order for me to go into any detail as to how that should be done, but the House of Commons is getting to a point when it will be prepared to consider carefully any proposal which this or any future Government may make to bring into the mesh people who have quite clearly deliberately attempted to escape their just share of taxation. I believe that a Government which without animus seeks to deal with people of that kind will not find an unsympathetic House of Commons prepared to carry into law properly considered proposals of that character.

Mr. Benson: I cannot allow the remarks of my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) to pass without some protest. Nobody in the last few years has been more interested in stopping up holes in our Income Tax legislation than I have, and no one has taken more interest in tax avoidance. But I should view with horror the idea that this form of legislation should carry with it a retrospective penalty other than the liability to the tax avoided.

Mr. Pethick-Lawrence: I never suggested that.

Mr. Benson: The major cases that come before the court are types of evasion which are themselves legal until we have made them illegal. Our whole legislation for the past 20 years since Sur-tax became a serious burden has been to make certain types of transactions not evasive in their results but at the same time leaving them legal. Certain transactions may still be done but the income still remains liable to tax. We are continually having to broaden our legislation and cast our net further afield as more elaborate schemes become evolved. If we wish to strengthen the hands of the Exchequer, the way to do that is not to impose a retrospective penalty as for fraud but to make any such legislation as we pass retrospective in its tax effects. That these ingenious gentlemen should be retrospectively punished for fraud is something very contrary to English law.

The Attorney-General: If it is the test of a good Amendment that some people think it goes too far, that some think it does not go far enough and that some approve it, this Amendment passes with flying colours. There is about an equal number of my hon. Friends who fall into each of these categories. I want to say one or two sentences on the general topic. I have been asked by successive Chancellors of the Exchequer for nine years to play some part in what are called tax evasion Clauses in Finance Bills, and I welcome the general attitude to what I may call tax evasion schemes which was exemplified by the remarks made by my hon. Friend the Member for East Birkenhead (Mr. Graham White) and others and by the Noble Lord the Member for Horsham and Worthing (Earl Winterton), although I disagree with him if he suggested that one ought not to be too anxious about the effect of the Clause on innocent people. It is the business of the Government and this House to see that as far as possible that does not happen. Speaking generally on the Amendments—and nobody has taken a violent point against either of them—the problem which confronted my right hon. Friend arose from the fact that the Clause imposed a joint and several liability. That was why my right hon. Friend came to the conclusion that it would be right to insert certain safeguards for what has been called the innocent classes—classes, at any rate, which might contain wholly innocent people and whose financial benefit could be evaluated and limited. I think that that was right, and I hope the Committee will think so too
I agree that it is easy to put forward on one side of the argument a banking institution, accountant, solicitor or barrister who knows what is going on. He might be asked for his advice, and if he gets no more than his normal fee, he is not brought under joint and several liability. On the other hand, it seemed to us that there might very well be a number of cases where professional service had been rendered, possibly cases in which there was absolutely no reason to suppose that they knew about the ultimate destination, and we are told—and I believe it of course —that many of the original shareholders in some of these concerns were quite innocent of the purposes for which the original offer was put forward. A professional person might have been em-

played in drawing up the original offer and might equally not have known what it was proposed to do at a later stage. Therefore, although you cannot get in these things an absolute line with the white on one side and the black on the other, because there might be a lot of grey and speckled in between, we did our best not to go too far but to provide first for the compulsory apportionment to the original shareholders and then to exclude professional men and the classes who could show they got no more than a normal return. I agree with my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) in hoping that if one of these professional men get a special fee or a fee of a special size because this sort of thing was in the wind, the Clause will be construed as not protecting him.
My hon. Friend the Member for North East Leeds (Mr. Craik Henderson) raised the point about the whisky being sold at once, but that is what has happened. The whisky has in fact all been sold.

Mr. Craik Henderson: But not by him.

The Attorney-General: The whisky has in fact all been sold, and the extra money which has gone in part to him and in part to other people results from the fact that there was an intention to sell the whisky in accordance with the scheme. In some of the cases we have had the whisky was sold on the same day as the shares were transferred. Though I agree that notionally you can say that if that had not happened the selling of the whisky might have been spread over a number of years and that this might have affected the value, there is a good deal to be said for saying that, limiting as we have done the original shareholder's liability for the excess amount as between him and the others, we must take facts as they are and the facts as they are, are that the whisky has been sold.
My own view is that this Clause will kill this type of transaction. It will take the money out of it, and it will do more than that in the sense that the "joint and several liability" remaining for all concerned apart from the original shareholders, not only would they be in jeopardy of handing back what they had in fact kept in their pockets but they will be liable to have to hand back profit which has gone into the pockets of others. It is true that there is provision that one individual can sue for a contribution if he has


had to pay more than he got, but I think the fact that there is this joint and several liability does make the Clause in that sense a penal clause and will I believe make 't effective in stopping this type of transaction. It is retrospective and applies to all these past transactions. If I am right in thinking that it will stop these transactions for the future I think that that is perhaps an added reason for those who were inclined to think that our Amendment -might go a little too far for reconsidering their attitude because the Amendment will if that is right operate in the main on what has happened in the past when the scheme was legal, although I agree that everybody ought to have known that it was an extremely discreditable thing to do.
In reply to the point raised by my hon. Friend the Member for East Birkenhead about a professional man not within the Amendment, there is a power to apportion and that power includes the power not to impose any liability on a person who might be within the words of the Clause. Therefore, if one can imagine some innocent broker who just passed the whisky through from A to B and took the ordinary percentage whatever the broker's percentage is, there is every reason to be confident that the Commissioners will exercise their powers and would not attempt to apportion to him any of the financial benefit which it -was intended should descend on those who profited by the transaction.

Mr. Woodburn: Do the words "by reason only" still leave the Government with a considerable amount of power even in the case of people who are exempted and still leave an apportioning power with the Chancellor?

The Attorney-General: You have to read the following words. If the person crops up later in the proceedings, you can hit him.

Mr. Ivor Thomas: May I ask what it is that makes this Clause retrospective? I can see nothing in the Clause itself to make it retrospective. Can the right hon. and learned Gentleman assure us that if cases come before the courts there will be no doubt about its being retrospective?

The Attorney-General: The whole purpose of the new Clause is to deal with past transactions. Under the original

Clause it is retrospective. The hon. Member will not find any reference to it in this addition.
Amendment agreed to.
Further Amendment made: In page 16, line 14, at the end, insert:
(5) For the purposes of this Section, a barrister, solicitor or accountant shall not be treated as having obtained financial benefits by reason only that he received in the ordinary course of his profession remuneration in respect of ordinary professional services rendered in connection with any such transaction as aforesaid at a rate not greater than that customary in the profession for services of such a character, a person who carries on a banking business shall not be treated as having obtained financial benefits by reason only that he received interest at not more than the normal rate on a loan made by him in connection with any such transaction as aforesaid, and a person who carries on a business which includes dealing in stock of the kind to which a direction under Sub-section (1) of this Section relates shall not be treated as having obtained financial benefits by reason only that he bought some or all of the stock in question at a price representing the full market value thereof and disposed thereof at a profit."—[The Attorney-General.]

The Attorney-General: I beg to move, in page i6, line 25, after "and," to insert:
on any such appeal any other person specified in the direction shall be entitled to appear and be heard and.
This Amendment is moved to meet a small technical point. As the Committee will realise, if one of the persons to whom the liability is apportioned appeals on the ground that too much has been apportioned to him, a decision in his favour would increase the liability of the others, and the purpose of this Amendment and the one which follows is to provide that the others will have a right to appear and will be bound by the decision given.
Amendment agreed to.
Further Amendment made: In page 16, line 26, at the end, insert:
The decision of the Special Commissioners shall (subject to any appeal therefrom which is competent under the enactments relating to excess profits tax) be binding on the Commissioners and on the appellant and on all persons entitled to appear and he heard as aforesaid."£[The Attorney-General.]
Clause, as amended, ordered to stand part of the Bill.
Bill reported; as amended (in Committee and on recommittal) considered.

NEW CLAUSE.—(Relief from duty for agricultural vehicles.)

(1) Where a licence has been taken out for a mechanically-propelled vehicle under sub-paragraph (a) of paragraph 5 of the Second Schedule to the Finance Act, 1920 (which, as amended by the Seventh Schedule to the Finance Act, 1933, specifies the rates of duty to be charged on vehicles registered in the name of a person engaged in agriculture and used on roads solely by him for the purpose of the conveyance of the produce of, or of articles required for the purposes of, the agricultural land which he occupies), duty at a higher rate shall not become chargeable in respect of that vehicle by reason only that, during such periods and in such areas as may be specified by order of the Treasury, it is used, whether by the person in whose name it is registered or not, for any such purpose as is specified in the order.

(2) An order under this Section may be revoked or varied by a subsequent order of the Treasury.

(3) This Section shall continue in force until such date as His Majesty may by Order in Council determine.—[Mr. Noel-Baker.]

Brought up, and read the First time.

The Joint Parliamentary Secretary to the Ministry of War Transport (Mr. Noel-Baker): I beg to move "That the Clause be read a Second time."
Under the law as it stands, farmers can get licences for their lorries at reduced rates, provided they use the lorries only for their own individual work. The scale of duties for their vehicles up to four tons unladen weight varies from £10 to £18, as compared with a scale varying from £10 up to £50 for vehicles used for ordinary commercial haulage work. The concession made to the farmers is thus substantial. But if, under the law as it stands, a farmer uses his lorry to do ordinary haulage work for other people, then he must pay the ordinary tax; he loses the concession. That arrangement was made because it would not be in the public interest that fanners should in general use their lorries for such general haulage work; and if they do so they must be placed on the same footing as hauliers. This new Clause will not upset that general arrangement. Its purpose is simply to ensure that during the period of the war there shall be adequate and convenient transport for the nation's harvest. That is very important this year, because the Government, like the nation, are hoping that the great efforts of all those who have worked on

the land will be rewarded by a bumper harvest. To move the crops the ordinary commercial vehicles will be called in to help the farmers, and it is intended that as much Service transport as possible shall, where necessary, be used.
But we also desire to maximise the economic use of transport by making it possible for farmers to help each other with their lorries on the farms. If one farmer can conveniently go to the help of a neighbour who is bringing in his crop, perhaps endeavouring desperately to get it in before it rains, and if a little later that neighbour can go to his help in return, it is obviously desirable that this should be permitted; it should not be prevented by the present licensing system. This Clause makes it possible for farmers to help each other in this way without incurring liability for heavy additional taxation on their vehicles. The House will observe that the new Clause does not lay down when, where and for what purpose farmers may use their lorries in this way, but gives my right hon. Friend the Chancellor of the Exchequer the power to do so by Treasury Order. That is necessary, because the purposes, the areas and the periods, for which this arrangement is required, may all vary. The Treasury in their orders will lay it down, perhaps, that farmers' lorries may in the first instance be used only for carrying grain crops. They may lay it down that they shall be used only in such and such counties or districts and for such and such a specified period of weeks. It may well be that the crops to be carried will vary and that the times may be different in different parts of the country—indeed they certainly will—and the period may have to be shortened or extended in an unexpected way and for unexpected reasons. Therefore, it is obviously impracticable to provide for everything we desire to do by the terms of the Clause itself. Accordingly we ask the House to give this power to the Chancellor of the Exchequer. I would only add that this arrangement will not adversely affect the general haulier, and I hope that he will not think it does so. It is primarily intended to facilitate work in the fields and on the farms.

Question, "That the Clause be read a Second time," put, and agreed to.

Clause added to the Bill.

New CLAUSE.—(Reduction of excise licence duties on motor-cycles and private motor-cars.)

As from the first day of January nineteen hundred and forty-four section nine of the Finance Act, 1939, and the Eighth Schedule to the said Act (which prescribed increased rates of excise licence duties on motor-cycles and private motor-cars) shall be repealed and section thirteen of the Finance Act, 1920 (which imposes duties of excise in respect of mechanically-propelled vehicles) shall have effect as if the said Eighth Schedule had not been substituted for the Third Schedule to the Finance Act, 1934.—[Mr. Robertson.]

Brought up, and read the First time.

Mr. Robertson: I beg to move, "That the Clause be read a Second time."
The Chancellor of the Exchequer will remember that a number of my hon. Friends and I put down a similar Clause on the Committee stage, but owing to the lateness of the hour we deemed it desirable to ask leave to withdraw it. The object of this new Clause is to revert to the pre-war tax of 15s. per horse-power in the case of motor-cars, because the restrictions necessarily imposed upon the use of patrol and rubber have caused the tax to operate unfairly. The House will probably recollect that the horse-power tax was first introduced in 1920 and the rate was 20s. per unit of horse-power. It took the place of a small registration tax of £1 or £2 per vehicle, and also of a small petrol tax which was repealed at that time and remained in abeyance for a period of eight years. I submit that is a most material point, because it clearly proves that for a period of eight years the horse-power tax was the sole tax imposed on motors and therefore it was clearly a tax on usage.
From 1920 to 1934 the horse-power tax remained at 20s. per unit of horse-power, but in the Finance Act, 1934, it was reduced to 15s. to enable Britain to produce and sell more cars at home and abroad. The hopes entertained at that time were fully achieved. The figures are really remarkable. In 1938 there were more than 2,00,000 private cars registered in Britain, and there is any amount of evidence to show that the reduction of the horse-power tax proved to be a great stimulus to manufacture, a great relief to unemployment, and a considerable gain to the export trade. I think it clearly proved that very many people with small

incomes took up motoring, many for business purposes, still more, I imagine, to get out into the country, long before the State took any interest in town and country planning. The peasant in most of us wanted to get away from the hard pavements of the big cities, and undoubtedly the cheap motor-car and motor-bicycle and sidecar did enable many thousands of small wage-earners and income-earners to get into the country. Many had to go to live on unfavoured sites not too near railway stations where ground rents were lower, and they were able to use their motorcycles and cars to get to the station and carry on their business in the big cities and yet enjoy a rural life and raise their families in a better atmosphere.
In 1939, before the war broke out—I believe the motion had been on the stocks for some time prior to 1939 but it only became law in 1939—the horse-power tax was savagely increased from 15s. to 25s. per unit, an increase of 66⅔ per cent., and it has continued at that rate to the present time. Motorists have no grievance in regard to the curtailment of petrol and rubber, they know how essential they are to the war effort, but they have a definite grievance and a very serious one in that they of all taxpayers have been singled out as victims of a contract which has been frustrated. When this tax was brought in, in 1939, the Government, in exchange for the payment of the tax, gave the user of the car the unlimited right of the fine new roads which had been built. The motorist or motor-cyclist could use them to his heart's content, seven days a week and as often as he liked, because there were no restrictions whatsoever. But in 194o the system of the basic ration of petrol was introduced, and at a later date came the withdrawal of the basic ration, and to-day the only cars on the road—the only cars entitled to be on the road—are those of persons engaged on essential war work, on essential business work, or for essential domestic needs.
I wonder whether hon. members have any conception of how hardly this tax is hitting those persons who are compelled for business or domestic needs to use motor vehicles? I have a number of cases here, but I think it will suffice to quote one or two only. The first one concerns a lady living at Woking with an


invalid husband. She has a 10 horsepower car and she is allowed five gallons of petrol per quarter which is 20 per year. The horse-power tax is £12 10s. plus 9d. petrol tax on every gallon. That means that she has to pay 13s. 3d. tax on every gallon of petrol she uses. This House had no conception that conditions like that would arise when this tax was increased
by 66 per cent. in 1939. The House would never have passed that tax. How could they have increased a tax by 66 per cent and at the same time reduced the user of the vehicle by 80 per cent.? A tax of 13s 3d. a gallon on petrol is most unjust.
Here is another case. It is of a lady aged 61 and in poor health, living some miles outside Guildford. She has a seven horse-power car and is allowed four gallons a quarter, and the rate in her case is not less than 13s. 3d. per gallon. Another case near Oxford is of a tobacconist and confectioner who is running two businesses almost without staff. The businesses are separated by some distance, and he is allowed three gallons for three months. That is all he needs. In fact, none of these people have any complaint to make in regard to the petrol restriction, but why should this nation penalise these taxpayers, who are paying all their other taxes, both direct and indirect? Because they have motor vehicles they arc singled out for victimisation. Every motoring organisation in this country, representing more than 2,000,000 private motorists and perhaps a greater number of motor cyclists, support the proposed new Clause.
I ask the House also to support the Clause. It is directed against a most unjust situation. What is even more important than the hardship is the principle of equity in British taxation, which is violated in this case. We are spending the tremendous amount of £15,000,000 a day, half of which is being found by direct taxation, and we are proud of it, because the basis is fair and the burden is spread over the whole community according to income. The man with the bigger income pays most, and the man with the smaller income pays least. That is not so in this case. The people to whom I refer are bearing a tax of the savagery of which I have given an indication. The fair name of the Government is at stake. The fact that we need the money is no justification for continuing this taxation. If the taxa-

tion is wrong, we should put it right. I am quite certain that hon. Members who have fought the case of the underdog so strongly and well in this House will support the proposed new Clause against something which is wrong in principle and a hardship to the individual.

Sir John Mellor: I beg to second the Motion.
I hope very much that the Chancellor of the Exchequer will not look upon this as a humorous and optimistic gesture on the part of the Mover and myself. Even in war-time, if a case of injustice can 'oe made out, it should receive the proper consideration of the Chancellor of the Exchequer and of the House of Commons. The Finance Act, 1939, which imposed this high rate of duty, received the Royal Assent at the end of July of that year, when we were not actually at war, and it must be assumed that that Act was designed to impose taxation for revenue purposes. During the war Finance Acts are often designed to impose taxation for restrictive purposes of various kinds and not primarily for revenue purposes. On the assumption that this high rate of duty was introduced for revenue purposes, it must be borne in mind that at the time of its introduction the right to use a car was unlimited in regard to mileage. I hope my right hon. Friend will not argue that the rate of duty has no relation whatsoever to the amount of use, because that argument would be untenable. No duty is imposed unless a car is used, on the public road. No taxation is imposed upon a car that is only kept in a garage or used on a private road. This is not taxation on the possession of a car. I think the previous new Clause of which the House approved, introduced by the Parliamentary Secretary to the Ministry of War Transport, illustrates that point. It involved a discrimination of taxation of motor vehicles, having regard to the nature of their use.
If the rate of duty was in no way connected with actual use, as it was a flat-rate taxation, it must have been intended in 1939 to bear some relation to the average amount of use. It is clear that in war-time this has very important consequences. I cannot believe that in 1939 this House would have approved an increase in the rate of duty by two-thirds if it had been contemplated that a few


years afterwards that use would be reduced to a quarter or less of the previous average mileage. By the abolition of the basic ration the luxury use of cars has been eliminated, and use is now restricted to purely essential purposes. If this is taxation for the purposes of revenue, it is unjust. If, on the other hand, the taxation is retained on the present scale for an ulterior purpose, it is a wrong method. It is certainly right to endeavour to economise in petrol and rubber by getting all unnecessary vehicles off the roads, but effective powers are available for that purpose and have been exercised. Direct methods only should be adopted and not a method of imposing intolerable expense upon those who really need, and are permitted because of that need, to use their cars. Such a method hits users irrespective of the degree of their need. And the poor owner of a car is hit relatively harder than the rich one.
It seems even that attempts are made to make essential motoring very difficult. At Question time to-day I referred to the action of the Minister of Fuel and Power in apparently putting an indirect obstacle in the way of people desiring to use their vehicles under present conditions. I called attention to the fact that he has refused to consider applications for petrol allowances unless and until vehicles are currently licensed and insured. If an applicant has first of all to license and insure his vehicle before he gets a ruling as to whether he will get a petrol allowance or not and then his application is rejected, it puts him to the trouble and inconvenience and perhaps expense of obtaining a refund from the licensing authority and from the insurance company. It may well be that he forfeits a portion of the license duty and the insurance premium in the process. That type of indirect method, whether by penal taxation or by the type of obstacle to which I have referred, of trying to get cars off the road is wrong. The direct method should be employed, by powers which already exist. I hope that the Minister will seriously consider the scale of the present rates of duty in relation to the average mileage. I submit that they are at least five times what they were before the war. In this connection he should bear in mind that cars are only able to be used now for essential pur-

poses. I am sure that that is not the type of use which he desires to impede by taxation.

The Chancellor of the Exchequer (Sir Kingsley Wood): My two hon. Friends have ,put their case, as they always do, with conciseness and force. I must confess that I thought my hon. Friend who moved the Clause was guilty of some exaggeration when he talked about the fair name of this country and made references to underdogs with motor cars. I would like to put it to the House, in order to satisfy my hon. Friends, that there is a considerable measure of justice and reason for the course that has been adopted, and also to remind them that this is a very bad time indeed to approach me for revision on the lines proposed. No doubt in happier days many of these taxes will have to be reconsidered in the light of circumstances then existing, but I think the House will support me when I say that I could not possibly be expected to make alterations of the nature suggested unless there was an extremely strong case for them. I say that both as regards the proposed new Clause and as a little warning to others that may follow.
I dealt with this matter in answer to a Question by one of my hon. Friends who asked me a little while ago whether I could reconsider this matter in the light of representations that were made. I stated quite shortly then that, particularly in present financial circumstances, I could not depart from the principle that the amount of the licence duty payable on a motor vehicle does not depend upon the extent to which it is used. My hon. Friend supported his case in two or three respects, and. I must admit that the tax on the use of private motor cars was increased to a considerable sum in 1939, but that increase was a purely revenue measure and had no relevance, and has no relevance to-day, to the degree of usage. The next point made was that there is no tax on the ownership of motor vehicles. My answer to that is that there is nothing exceptional in this respect in the application of the motor licence duty. Take, for instance, the wireless licence duty, which is not payable for the ownership of the wireless, but for being in possession of a set capable of being used. The duty is not payable in respect of tobacco, wines and spirits in bond, but only when they are released and available


for consumption. I think the strongest point my two hon. Friends made was that the motor licence, in fact, permitted unlimited use of the roads under peacetime conditions, and that the licence is graded according to the horse-power as a measure of comparative usage. The answer to that is that licence duty based on horsepower cannot be regarded as a measure of comparative usage, and in fact, as we know, many small cars did prodigious mileages in pre-ration days. On the other hand, duty on petrol does provide taxation by usage.
I think the final point made was that under the stress of war the whole character of this unlimited-use licence has been altered as a result of the restrictions which the Government have found it necessary to impose. I am afraid the answer to that must be that war-time conditions have necessitated many restrictions and other serious disadvantages in many spheres, resulting, I am afraid, in heavy increases in overhead expenditure, for which no redress can be provided. My hon. Friend also said that the usage of the road by a licensed motor car is only in fact a minute fraction of the average peace-time mileage, and the tax per mile is therefore increased enormously. I am afraid that is so, but the extent to which car owners have been compelled to reduce their mileage as compared with their prewar practice varies within the widest limits, and I do not think that any uniform measure of reduction could be applied with equity to-day. I am afraid that my answer must be that I cannot at this time embark upon the alteration of a tax of this nature. I hope my hon. Friends and I will all be here when the matter can be reconsidered in happier times.

Sir William Davison: I am sorry I was not here at the beginning of this discussion. I gather however that the Chancellor is not willing to accept the Clause. What he said as entered the House was in reference to a question which I think I addressed to him some time ago, and to which he replied that the tax was not based on the amount of use made of a car. That is technically the truth. The Chancellor agrees with me, and I agree with him. But is it not a typical Treasury evasion of the truth? Of course, all taxes have to have regard to the use of the vehicle or whatever it is that is being taxed. That is to say, if

there are only three or four of a thing, a heavy tax would not be levied on them because that would put the article taxed out of action or else it would not be worth while. It was having regard to the general use of motor cars along the roads of the country that that particular tax was imposed, and to say that Mr. X or Mr. Y, who only used their car on five days a year, had to pay the same as Mr. Z and Mr. W, who used theirs every day, may be quite true, but the tax was imposed on the basis of the general use of motors throughout the country.
With regard to what the Chancellor said finally as regards motorists, that he could not allow any particular class to escape from taxation which they had previously borne, I would say that the users of motors do not desire to escape from any taxation which is fair. What they do say is that it is not fair to single them, a particular class, out for an undue amount of taxation which should be borne by the community as a whole, especially as present conditions are quite different to those obtaining when the tax was imposed. That is what is being done, for there has been an increase of tax of 66⅔ per cent. and a reduction in usage of 75 per cent. That really is monstrous, and there is no doubt whatever that had the facts been as they are at present when this additional tax was imposed, I think in 1939, it would never have been imposed, because now, quite rightly, for national purposes the use of motors is drastically restricted and practically no one has a motor now unless he is engaged in some part of the war effort. Therefore, to go on making people who are continuing to run a car which in 999 cases out of 1,000 is used for Government purposes, pay the enormous additional tax, which was only imposed in 1939 under entirely different conditions, is altogether wrong. I am sorry the Chancellor has been rather warped in that clarity and fairness of his judgment since he went to the Treasury. I am quite sure that if I or any other Member had put this straight point to him before he was entangled in the meshes of the net of Treasury reasoning, he would have at once acceded to our request and said, "This is fair. I am prepared to make the whole community pay a little bit more rather than that these overburdened and heavily penalised gentlemen should be mulcted in this way."
As an illustration—it is not strictly relevant, but it shows the Chancellor's mind —earlier to-day I drew his attention to the fact of no compensation being paid for the re-erection of railings which had been removed. It is the same sort of thing as taking something for nothing. I will not proceed with that illustration, Mr. Deputy-Speaker, as I see you are getting uneasy in your Chair. I am saying that the Chancellor is allowing his judgment to be a little warped by his surroundings. I would ask him, protected as he is all round by members with like minds to his own, to shake off the trammels of his associations of recent years and do the fair thing by this section of the community who are being unfairly dealt with and are bearing a very heavy burden, mainly in the interests of the State.
Motion, "That the Clause he read a Second time," put, and negatived.

NEW CLAUSE.—(Employment of boy helper and income tax payable.)

Where the payment of a bonus in addition to his agreed wages is made by the workman employing a boy helper the boy shall not be called to pay income tax on any such amount which is paid by his fellow employee as a gift or allowance.—[Mr. Daggar.]

Brought up, and read the First time.

Mr. Dagger: I beg to Move, "That the Clause be read a Second time."
It is quite true that we have not had up to now much encouragement from the Chancellor of the Exchequer. However, this new Clause affects an important section of the community, and one which has never enjoyed many if any privileges, and certainly never complete justice. I refer to the miners, and especially the boys who constitute a part of the miners. The concession, if made, will not mean a great financial sacrifice on the part of the Chancellor of the Exchequer. The House is aware that certain allowances are made in the case of men employed in the mining industry, such as for the purchase of particular clothes, tools and in some instances light and many other items. There is also an allowance—and here I am not claiming to speak for Great Britain, but I can claim to speak for the industry in South Wales, Monmouthshire and Gloucestershire—in the case of colliers who are in receipt of 4s. 6d. per week

they pay to their helpers or boys in excess of the payment recorded in the colliery office. The boys look upon these payments as of great importance. As an ex-miner and a helper myself at one time I can say that these payments are matters of great interest to the boys, because not only are they described as pocket money but as an amount of money they receive in addition to the regular weekly payments made to them on pay day. Here, in this case, its value is lessened to the boy—not to the man who pays it—because he has to pay Income Tax upon it, although as I pointed out, the man for whom he works is free from the payment of tax on this 4s. 6d. The helper has to pay Income Tax upon what is really, and is legitimately described as, a gift. I hope, in view of the fact that this is causing a considerable amount of irritation among boys, and in some instances among the men who make the payment, that the Chancellor will accept the new Clause, accepting my statement for what it is worth that it will only involve a very small sacrifice on the part of the right hon. Gentleman.

Mr. Ivor Thomas: I beg to second the Motion.
My views on the subject of gifts are by now familiar to the Chancellor. I think my hon. Friend the Member for Abertillery (Mr. Daggar) has put a very persuasive case. As he says, the sum involved is exceedingly small, because there must be relatively few boys who pay Income Tax. In any case it is an addition to the agreed figures of wages and is therefore a bona fide gift. I do not think it is necessary to argue it at great length, as the general principles governing this question have been debated at great length in the House recently. I know the Chancellor has hardened his heart to-day, as he has warned us, against concessions. The hon. Member for South Kensington (Sir W. Davison) referred to his previous amiable disposition. I am afraid he has suffered from the occupational disease of Chancellors of the Exchequer. I hope that on this occasion he will feel able to make a small concession which will be very much appreciated in all the coalfields of the country.

The Financial Secretary to the Treasury (Mr. Assheton): I am very glad the hon. Member for Abertillery (Mr. Daggar) has raised this matter, as it has given me an


opportunity of clearing it up from the angle of the Inland Revenue. As my hon. Friend pointed out, these sums which are paid to boy helpers in the mining industry are in fact sums of money which the miner who pays them is entitled to charge against his own Income Tax assessment as business expenses. I think if that is accepted—my hon. Friend took pains to tell the House that that was in fact the practice, and it is a practice which the Inland Revenue approves of—it is quite clear that these payments are not so much gifts as definite payments for work done.
Even if the payment is in fact in the nature of a gift, and not a payment for work done, none the less, as was pointed out when we discussed not very long ago the question of Easter offerings, with which my hon. Friend the Member for Keighley (Mr. I. Thomas) is very familiar, if gifts are made to a taxpayer and are received by him in virtue of his employment, they are taxable just as much as any other part of his income. I am sorry, therefore, that in the circumstances there is no doubt that we must continue to regard these payments as being part of the income of the boy helper, and my right hon. Friend is unable to accept the Clause.

Question, "That the Clause be read a Second time," put, and negatived.

NEW CLAUSE.—(Reduction of licence duties on, gas-propelled vehicles.)

(1) As from the first day of January, nineteen hundred and forty-four, the rates of Excise Licence Duty chargeable under the Second Schedule to the Finance Act, 1920, as amended by Section twenty-five and the Seventh Schedule to the Finance Act, 1933, in respect of the classes of mechanically-propelled vehicles described in the provisions hereinafter mentioned of the said Schedule, shall be reduced in the case of gas-propelled vehicles to one half of the duty which would but for the passing of this Act have been chargeable in respect of such vehicles.

(2) The provisions hereinbefore referred to are paragraph 3, sub-paragraph (d) of paragraph 4, and sub-paragraphs (a), (b) and (c) (iii) and (iv) of paragraph 5.

(3) For the purposes of this Section the expression "gas-propelled vehicle" means a vehicle propelled by any fuel which is wholly gaseous at a temperature of sixty degrees Fahrenheit under a pressure of thirty inches of mercury, such fuel being produced in an apparatus carried on the vehicle or on a trailer drawn by the vehicle.—[Mr. Isaacs.]

Brought up, and read the First time.

Mr. Isaacs: I beg to move, "That the Clause be read a Second time."
I do so without very great hopes, in view of what has transpired. The object of this Clause is to secure some abatement of the tax on commercial vehicles using producer gas. In October, 1942, the Government ordered goods vehicle operators with more than 10 vehicles to convert at least 10 per cent. of those vehicles to producer gas. That conversion involved capital expenditure, but they were not permitted to put in that capital expenditure as current expenses, although it brought upon them a fairly heavy charge. The use of producer gas vehicles means an increase in operating costs. The equipment requires constant attention. At this stage, at any rate, the vehicles are not highly efficient; probably when there is an opportunity of making use of the skill and experience which have been obtained they will be far more efficient. The use of producer gas means a decrease in the revenue-earning capacity of the vehicles. When the producer plant forms part of the vehicle itself, it reduces the space available for goods, and there is, in addition, less efficiency in running and a lower mileage for the vehicle. If, on the contrary, a producer gas equipment is fitted as a trailer, it adds to the load in another direction, and requires additional tyres, and therefore the use of more rubber; so the tendency is to use this equipment on the vehicle.
It has been estimated that there are commercial vehicles to the number of 11,615 running to-day on alternative fuels of various kinds. Of these, 6,412 are running on electricity, and therefore are not really converted vehicles. They are mainly suitable only for short journeys. Of those which have been converted, 1,200 are.running on coal gas, and 1,400 on creosote. None of these requires anything like the capital expenditure for converting the existing vehicles as do those which run on producer gas. There are 1,504, according to the latest figures, running on producer gas. These are taxed at anything from 1504, according to the last figures, running on producer gas. These are taxed at anything from £25 to £90 a year. The proposal is that the tax should be reduced by half. Assuming that they are all taxed at £90, this reduction would cost the Exchequer £67,680. That seems a large figure, but, taking into account the whole Revenue of the country, it is not large.


The concession would afford some compensation to the users for the cost incurred in conversion, in running, and in the loss of user, and would encourage the conversion of more vehicles. "Hope springs eternal in the human breast," and my breast is human, even if I do not look it. I hope the Chancellor will find it possible to accept this Clause.

Mr. Ivor Thomas: I beg to second the Motion.
I do so on the highest ground of public policy. Although this may not seem to be the time for encouraging the use of fuel derived from coal any more than the use of imported oil—because there is a shortage of coal no less than of oil—we must look ahead. I do not want to appear alarmist, but it is said on the highest authority that the world may see a shortage of oil supplies within 20 years. It may be very difficult for our modern civilisation to adjust itself to such a contingency. Even the United States, producing about 70 per cent, of the world's output of oil, has felt it necessary to embark on schemes for the hydrogenation of coal and the production of other fuels in the immediate future. That is a pointer to the direction in which we are moving. It is a fact that the average of all the most reliable estimates shows that the present supplies of crude oil will begin to run short within a period of 20 years. It may be that new factors, not known at present, will upset that estimate, but the State should do all it can to prepare for such a contingency. To that argument we can add the general arguments for using fuel derived from native coal rather than imported fuels. On this ground of the utilisation of coal generally, I would like to support the new Clause. I only regret that my hon. Friend has not made it wider. I wish it had included coal gas. The State has already done something on the lines sought. I believe it is a fact that, whereas the weight of the producer used to be taken into account for the purpose of taxation, that is no longer the case. The adoption of this Clause would give a definite stimulus to the production of fuels derived from our native coal and would give great help to our own coal industry.

Mr. Evelyn Walkden: Although I am of the opinion that the Chancellor is going to provide the same answer—or at least that he has the same

other Clauses which have been moved, I am inclined to submit a further plea on behalf of this Clause. It is in connection with methane gas, which is gas obtained from sludge digestion plants. It is solely derived from such plants. When we hear pleas for the elimination of waste, it should be known that hundreds of thousands of cubic feet of gas were being wasted week by week before the war at one large sludge digestion plant. Many other areas have now introduced sludge digestion plants, and the scientific research experts have devised equipment to make use of this gas to run vehicles similar to those which we are now discussing. I believe that the City of Birmingham is running buses on the same sort of gas, and one or two other corporations are running buses or collecting-vehicles on that kind of gas. Every day, at the plant to which I refer, there used to be a huge flame burning, a 15 inch jet going up into the heavens, causing waste all the time. Now the scientists and the need for economy have come to our aid. Useful work has been done. But my right hon. Friend charges the same amount of tax for a plant which is actually eliminating waste, in a manner that we ought to encourage and admire. I believe that just before the outbreak of war about 60,000 cubic feet of gas were wasted every day in the borough where I live. Certain arrangements have been made to ensure that that gas is not wasted, but certain local authorities up and down the country, whether it be Sutton and Cheam at one end of the scale or Birmingham at the other, are being penalised because we do not recognise the work they are doing in order to stop waste. I ask the right hon. Gentleman, therefore, to be not only generous but genuinely considerate towards these developments. There is a great future for methane gas. It is produced practically from waste, and we are losing a very valuable product because we do not encourage people to convert their vehicles and use this gas in the most economical manner.

Mr. Loftus: Six or seven years ago I was urging the same point of view as that which has been put forward so convincingly by hon. Members speaking on this Muse. Probably my right hon. Friend the Chancellor will not give the full concession which is asked for, but I hope that he will hold out some answer prepared—as he has given on


encouragement for the future, and will realise that there is a strong feeling in the country that we should do everything possible to prevent our people being so very dependent on imported fuels when we have in our own country a fuel which we could utilise.

Sir K. Wood: We have had three or four very interesting speeches on this matter. In general, if I were occupying my present position in normal times I would desire to give what encouragement I could. I commend in particular the speech of the hon. Member for North Southwark (Mr. Isaacs), because he clearly appreciated the financial issues. He told the House what the cost of the proposal would be, and, without entering into the controversy, or fight, between my right hon. Friend the Home Secretary and my right hon. Friend the Member for Wakefield (Mr. Greenwood) upon "meaningless symbols," I would say that it is a useful thing for the House to know what in fact is involved when an Amendment is proposed; I wish that my hon. Friend's procedure were always followed.
There is this to be said on the other side—and I say this from the point of view of the arguments that have been adduced—that the disadvantages which my hon. Friend mentioned are to some extent offset by the fact that the vehicles using this method of propulsion operate on tax-free fuel. I am informed that a ton of producer-gas fuel, which would cost about £6, plus about £2 10s. for petrol for starting purposes, would take the vehicle an average of about 1,400 miles, for which the corresponding figure running on petrol alone, at present retail prices, would be about £15. Apart from the financial considerations and my inability to make these alterations at this time, I am afraid that the exact suggestion that has been made is not particularly practicable and my hon. Friends may have this in mind when they bring these matters forward perhaps in some other form on some other occasion.
It is very difficult to see how it would be practicable to make the adjustments which would be necessitated if this particular method were accepted. Apart from the fact that liquid fuel has to be used for starting, and also in the case of any failure of apparatus, there is a type of conversion apparatus which

enables an engine to be run partly on heavy oil and partly on gas. It is also to be remembered that producer-gas apparatus cannot be used for certain types of work. Therefore it would be very difficult indeed to devise appropriate categories according to the proportionate use made of producer-gas and liquid fuel and it would be almost impossible to enforce their observance. 1 give that information to my hon. Friends because no doubt they will desire to pursue this matter, and I would not desire to discourage them from doing so when we are better able to deal with modifications of present taxation, but I regret that in present circumstances, as hon. Members will appreciate, I am unable to accept their proposal.
Question, "That the Clause be read a Second time," put, and negatived.

NEW CLAUSE.—(Income tax of married persons.)

Provision (1) of No. 16 of General Rules applicable to Schedule E in the Income Tax Act, 1918, shall cease to have effect in so far as it results in the joint income of a husband and wife being assessed to tax at a higher amount than would be the case if each were assessed to tax separately as unmarried persons.—[Sir I. Albery.]

Brought up, and read the first time.

Sir Irving Albery: I beg to move, "That the Clause be read a Second time."
In rising to move the new Clause which stands in the name of my hon. Friend the Member for Faversham (Sir A. Maitland) and those of certain other hon. Members, I should like to explain that, although my name is not given on the Order Paper to-day, it appeared with that of several other Members of all parties, including some of the lady Members, when the proposal was first put down. I would like also to draw attention to the fact that under the present procedure, the Order Papers giving notice of the new Clause reached very few Members of the House, which I think is rather inconvenient.
The question of married persons' In-come Tax is a very old subject and from 10 to 15 years ago it was constantly being raised in this House at Budget time. I want to make it clear that I am not raising it as a defender of the rich or in an en-


deavour in a time of national stress—I do not really imagine that the proposal could be accepted at the present time—to help a certain class. In fact I think that something on these lines could only be accepted eventually with certain other readjustments. There are many people of comparatively humble means who would benefit if these adjustments were made. I want very briefly to outline the history of this taxation. The taxation of married people jointly in the present manner appears to have come in about 100 years ago, when Income Tax was, I think, sixpence in the £. In subsequent Budgets this joint taxation has been protested against, and obviously, owing to the changed status which has come to women in recent years, they are not likely to tolerate the present arrangement much longer.
When the argument for change has been put on previous occasions there have usually been three main replies. The first reply used to be: "You have the advantage of a joint household. The expenses are less and therefore it is proper that you should make a bigger contribution to taxation." That does not seem to be logical now, especially since we have been obliged to introduce a marriage allowance because thus you get two diametrically opposite situations. The next argument put up against it, which was used by the present Prime Minister, when Chancellor of the Exchequer, was, "We cannot do this at present, and in any case, there is no hardship." There was not much hardship then. I do not know what the Income Tax was then; it may have been 2s. or 3s. in the £, but we have a very different state of things to-day. We have an Income Tax of 10s. in the £ and Surtax on top of that, and when you get into the higher scales there are certain people who have only a few shillings left out of the 20s. You may think that these people are not to be pitied, but that is no reason why, if we must levy very heavy taxation, it should not be done fairly. Obviously, the position of married persons would be much better if they were equitably taxed and individual men and women had separate assessments. The last and generally the overwhelming argument, the one which will, no doubt, be put to-day against any amendment of the law being accepted at the present time, is the question of money.

There may be additional difficulties, such as administrative difficulties, and, as I say, I do not think the Chancellor of the Exchequer would be in a position to accept this Clause, or even one more suitably framed at the present moment. But when we want to get things of this kind rectified we have to give notice at an early date.
I do not suppose that if the war goes on it could be done next year, but I hope that it can and will be done in the first post-war Budget. The present position will then need a good deal of revision. The first Budget which is introduced into this House in which there is some reduction of taxation should, before other things, take into account injustices and any cases of inequitable taxation which at present exist. It is in that direction that the first remission of taxation should go, and, with a view to getting things going again, I trust it will be possible to put right these inequalities and do something over and above that to stimulate generally the trade and industry of the country. When such steps are taken, it will be a matter for consideration whether there is any case for the married allowance at all. When people get married the woman, if she has income, should togther with her husband get personal allowances, and, if she has no income, get dependants' allowance. There does not appear to be any justification for the difference between personal allowance and dependant's allowance. Children's allowances ought to be increased as soon as possible, especially in view of the higher living costs. If these are increased there does not seem to be any really valid reason for the marriage allowance as such. I hope that the Chancellor of the Exchequer will have very serious consideration given to this matter; that to-day he may say, at any rate, agree that the matter merits very serious attention and that in better times, perhaps in the not too distant future, some revision of the tax may take place.

Sir Adam Maitland: I wish to support what has been said by my hon. Friend the Member for Gravesend (Sir I. Albery) and also to say that, apart from the right hon. Gentleman himself, nobody would be more surprised than I, if the Chancellor of the Exchequer accepted this Clause to-day. It is always well to be frank with the House. My hon.


Friend was characteristically honest in his presentation of a very difficult case. I would suggest one reason why the Chancellor of the Exchequer should support the suggestion that at any rate there should be consideration of this matter. He is a good-living man and I suggest that this matter should be considered on grounds of public morality. Rule 16 in the Income Tax Act, 1918, dealing with procedure lays down the special procedure that:
A married woman acting as a sole trader, or being entitled to any property or profits to her separate use, shall be assessable and chargeable to tax as if she were sole and unmarried.
And there is the proviso that the profits of a married woman living with her husband—these are the words I wish to emphasise,
shall be deemed the profits of the husband, and shall be assessed and charged in his name.
I suggest that my right hon. Friend the Chancellor of the Exchequer is carrying on a procedure which is likely to induce a husband and wife, in these days of high taxation, to live apart. The Minister of Health is concerned with the increase of the birthrate which also may be affected on financial grounds. I suggest that the Chancellor should give attention to this matter. My hon. Friend the Member for Gravesend very properly pointed out that whatever may have been the views of some of our lion. Friends of the Labour Party in years gone by, this cannot to-day be regarded as a matter affecting only the richer section of the community. I would remind my hon. Friends that the law as it stands to-day, makes liable for taxation the earnings of every working woman and these are taken into assessability to tax as part and parcel of the income of her husband. Vast numbers of people are now engaged in industry and it means that we have a system of taxation which bears harshly on the people with lower incomes.
This is a wide subject, and because of the extension of the range of Income Tax which has been made, I think it is impossible on financial grounds for the Chancellor to accept this new Clause. Nevertheless, I suggest, that it is not the introduction of a new principle because I believe the injustice of the present system has been recognised by the fact that an allowance has been made£I think it is £50, per annum—in the case of the earnings a woman receives, quite apart from her husband's earnings. If the Chancellor

cannot "go the whole hog," I suggest that he should give some attention to the question of increasing that allowance. My hon. Friend referred briefly to the history of this taxation. We have accepted much of the practice and principle of assessment under which, in days when the tax was low, if it was unfair, it was unfair to a mild degree but which now, when there is such a high rate of taxation, imposes a real hardship. In view of the fact that taxation is so much higher, I hope the Chancellor will direct his mind to the possibility of increasing the allowance.

Mr. Lipson: I rise to express the hope that the Chancellor will disappoint the expectations of my two hon. Friends who have moved this new Clause and that he will be willing to make some concession. They have quite properly drawn attention to a matter in our taxation system which is unjust. I was sorry to hear that they have so little faith in the Chancellor as to doubt whether an injustice which has been made clear to him will not be put right. This injustice has existed, we have been told, for 100 years, and the question might well be asked: "Why raise it now?" I would remind the House of the fact that because a grievance is an old one that does not make it any less of a grievance. The fact that it has been allowed to go on so long is an additional argument for the view that the removal of that grievance is long overdue. Further, there are circumstances at the present time which make this grievance felt very much more than it has been in the past. The number of people who were concerned with this joint assessment in the past was nothing like so numerous as it is to-day. I do not know whether the majority of married women are earning money to-day but I think we are very near that position. It is quite likely that financial conditions in the future will be such that an increasing number of married women—possibly in the not distant future an overwhelming number—will be earning, and, therefore, will be penalised by this joint assessment. That being so, the Government ought to sit up and take notice.
It seems to me very unfair to-day, when two women are working side by side, one married and the other unmarried, both having responded to the patriotic call to work in war-time, that the married woman, simply because she


is married, should be left with a smaller proportion of her earnings than the Unmarried woman. That is bound to cause dissatisfaction and a sense of injustice. I suggest to the Chancellor that when taxation is as high as it is to-day, it is more than ever necessary to convince people that that taxation is equitable in its incidence and that every effort will be made to remove anomalies. The more this joint assessment of husband and wife is studied and considered the more unfair and unjustified it is. Therefore, I ask the Chancellor to give us, at least, some definite assurance that he is alive to the urgency of the question and will be prepared to take action to remove a grievance which has existed for too long and which ought by now to have been removed.

Mr. Clement Davies: I am glad that this question has been raised because it is another instance of the way in which we go on year by year tolerating anomalies. It is high time that the whole of our Income Tax position was inquired into and a new set of rules brought in which would allow us to be treated equitably all round. The reason why we have this anomaly to-day is that when Income Tax was first levied the law of this country regarded woman as man's chattel; all her property, on marriage, became the property of her husband. She had no property of her own. Fortunately this House and another place changed that law, as long ago as 1884, by the Married Women's Property Act. Women were then regarded, so far as property was concerned, as separate individuals, but when the next Budget came along no notice was taken of the change. The woman's property, for Income Tax purposes, was regarded as her husband's. I am glad that the hon. Member for Faversham (Sir A. Maitland) made his appeal on the grounds of morality.
May I direct the attention of the Chancellor to an excellent series of reports which has been edited by that good and sound lawyer the senior Burgess for Oxford University (Petty Officer Herbert) who, years ago, called attention to this anomaly and its inequity? The Chancellor may perhaps remember that there was a very respectable professor and his wife who were charged with having misled the court and abused the process of the Court. The position, apparently, was that these

two people having been married for many years, and having been regarded as the most happily married couple in the whole neighbourhood, suddenly startled that neighbourhood one day by being parties to divorce proceedings. I forget whether the professor started the proceedings against his wife or vice versa, but the suit was undefended, the decree was made and at the end of six months was made absolute. Then, to the joy of everybody, the professor and his wife continued to live as happily as ever afterwards. The point was that the divorce was secured in order to separate the income of one person from the other so that there would be two forms for Income Tax instead of one. The court was asked to say that this was iniquitous and misleading. The point of all this, as has so often been brought to the attention of the public by the senior Burgess for Oxford University, is that here was an inequity which ought to be put right. The Chancellor is to inquire into the incidence of taxation and into a proposal as to whether we should pay as we go and I hope he will decide in favour of the new form. When he does so, I hope he will also decide that these inequities must be removed so that we all pay a fair share and no more.

Mr. Pethick-Lawrence: I know that there is anxiety to finish this part of our proceedings fairly rapidly and I will endeavour to be as brief as I can. I think there is a great deal of misunderstanding with regard to this question of tax on married persons. In the speeches which have been made I do not think full allowance has been made for the very great changes that have taken place in recent years regarding the whole question. Thirty years ago, which I was working in association with women who were trying to get the vote, this problem was brought forward and I think I was the first person to describethe peculiar taxation which prevailed then regarding married couples as a "marriage tax." A marriage tax there was on practically all couples where the wife was in receipt of income. There was a marriage tax and a parent tax and that continued for a very long time. There was hardly anything to be said on the other side except that the rate of Income Tax was very small and that in a large number of cases the amount paid did not amount to very much. In its wisdom this House, being seized of that idea, thought


it desirable to introduce an allowance on account of the wife and also about the same time allowances for children. By means of those allowances the real marriage tax was to a considerable extent swept away. To-day a married couple with children are, as a couple, considerably better off in some respects than two private persons who are unmarried. Therefore, there has been a good deal of misapprehension.
But that is not quite the whole picture. At the time this point was raised there was another grievance—the unfair status in which a wife is placed compared with her husband. The hon. Member for Faversham (Sir A. Maitland) recalled the precise wording of the rule under which this continues to exist and he must have startled some Members when he read the old-fashioned words that were used at a time when a woman was the chattel of her husband and her income was simply regarded as his. The fact to-day is that a very large part of the injustice to married couples with small incomes has been swept away, but certain parts still remain in certain cases, and when you come to people with high incomes, more particularly those who pay Surtax, there is a considerable tax on marriage. If we deal with this first of all, I am rather doubtful whether the House would be willing to say that any well-to-do man could settle part of his property on to his wife and therefore the couple, as a couple, could escape a great deal of their Surtax. Therefore, I am not quite sure that this is the right method of dealing with the case. I think the Amendment was on the Paper on the Committee stage in a form in which it proposed to have the taxation of married couples in all cases precisely as if they were single persons.
I asked the Chancellor of the Exchequer some months ago what would be the effect on the revenue if the taxation of married couples were in all cases on precisely the same basis as if they were single persons, and the right hon. Gentleman pointed out that there would be an immense increase in the taxation of persons united in marriage because, owing to the allowance that is given to the wife at present, married couples pay, generally speaking, very much less than they would do if they were assessed entirely as single persons. I think this is one of the matters which, when the

appropriate time comes, should be investigated, and I hope that another Commission of some kind will sit on the Income Tax, and the whole of this question of the taxation of married couples is one of the points that ought to be considered and amended. It will then have to take into account, not only the position of the married couples qua married couples as against single persons, but it will also have to review the relationship between partners of the marriage as far as Income Tax is concerned. There is no doubt that that is in an unsatisfactory state at present. In some cases the husband pays all the tax—improperly it may be; in some cases the wife is paying the tax and is entitled to recovery and can only get it through her husband, which is most humiliating for her. When it comes to surtax, the husband has to pay the whole of it, and the wife can only be called upon for her contribution in the first instance if she is willing to pay it. Although I believe a division between the two could be enforced in a court if necessary, it is very rarely that that will ever be done. Therefore, the whole question of the taxation of married couples is in a very anomalous position. It needs emendation and I hope an inquiry will be held after the war with a view to having that emendation.
But I could not support the Clause in its present form. It would be quite impossible for a married couple to have all the advantages and none of the disadvantages of being married, which is what the proposal means. If you wont further and carried the Clause in the form in which it was originally put down in Committee, which I imagine was out of Order, you would get something which would be considerably to the disadvantage of married couples. This is a very complicated and difficult question, because married couples between themselves live and work and earn money in entirely different ways. In some cases you have one spouse doing all the outside work. The other may either be a dependant or, mooch more frequently she is not a dependant at all but an active worker in the house, but she is not gainfully employed, and therefore appears to be in the nature of a dependant when she really is not. Then you get the case where the woman goes out to work and earns money, and at the same time you


have the Income Tax authorities treating the two incomes as one, the husband being responsible for his part and the woman paying on her earnings and yet not having any easy method of recovering as she would have if she were a single person. There is an infinite variety of ways in which a married couple carry out their mutual financial arrangements, and that makes the problem exceedingly difficult. I hope, when the time comes, these points will be borne in mind with a view to making a new regulation with regard to the taxation of married couples which is not only equitable as between the married couple and two persons not in wedlock, two brothers, or relatives or brother and sister or whatever it may be, but also making the payment of taxation between the two individuals forming the married couple just in the first instance and not derogatory to either party to the marriage.

The Attorney-General: My hon. Friends who moved and seconded the new Clause were so clearly conscious of my right hon. Friend's difficulties in making a change of this kind at this time that I hope nothing I may say, to some extent in criticism of the proposal, will be regarded as in any way provocative. I agree with them that this raises an important and difficult question. In the first place, I think it right that I should put before the House what in fact the present position is. A proposal that in all cases husband and wife should be assessed as if they were not married would inflict a great extra burden on the majority of people within the smaller range of taxpayers. The recent increase in the wife's earned income allowance involves a lower tax than if husband and wife were treated as separate in all cases where the income is earned, unless the total earned income is more than
£1,500. So that, in so far as you have in mind joint earned incomes, the present law is more favourable to married couples than if they were treated separately. My hon. Friends did not really press the Clause but raised it in order that it might be considered. I think it wrong to use language which suggests that this is some patent anomaly and injustice which has been allowed to continue to exist solely through the lack of enterprise of the Chancellor of the Exchequer. The Royal Commission on Income Tax very carefully considered the problem and came to

the conclusion that on the whole the present system of assessment should be preserved, and it may well be that, if there are improvements to be made, they should be made within the existing basic principle rather than by abandoning that principle and introducing the principle of separate assessment as if the parties concerned were unmarried.
I do not agree with my hon. Friend the Member for Gravesend (Sir I. Albery) that the principle of a single assessment and the marriage allowance are logically inconsistent with each other. I should have thought the opposite was the case, and that, if we have the single assessment principle, logically you ought to have, as we have, the wife's allowance. If you had a separate assessment of the husband's and wife's income, treated in all respects as if they were unmarried, the marriage allowance logically would have to go. As my hon. Friends made it clear that they did not really press the Clause, the financial consequences of which, particularly in the higher ranges of income, would be very considerable indeed, perhaps I have said enough in alleviating some misapprehensions which may have existed in regard to incomes up to £1,500 and also by agreeing with the right hon. Gentleman that the question is not a simple one and that a final satisfactory solution may not necessarily be on the lines of separate assessments.

Mr. Pethick-Lawrence: Will the right hon. and learned Gentleman also agree with what I said that the position between the parties to the marriage needs very careful revision?

The Attorney-General: One could not consider the wider question without considering that as part of it.
Question, "That the Clause be read a Second time," put, and negatived.

NEW CLAusE.—(Provision for helping exports.)

It shall be lawful for the Treasury to permit such firms as can prove pre-war overseas trading and development expenditure, to set aside out of profits, as a reserve for future trading and development, a sum each year based upon their normal pre-war expenditure for this purpose: such money shall be held by the Government during the war and returned to the firms concerned at the conclusion of hostilities only for the specific purpose of active overseas trading and development.—[Mr. Hannah.]

Brought up, and read the First time.

Mr. Hannah: I beg to move, "That the Clause be read a Second time."
Very few of us will want to quarrel with a remark made something like 2,000 years ago by Eliphaz the Temanite that "man is born to trouble as the sparks fly upward." Two main worries disturb the peace of mind of all of us at the present time apart altogther from the terrible war in which we find ourselves engaged. The first is the vital statistics of this country which are, in the language of a well known Member of this House, most unsatisfactory, and the second is our National Income which is causing us very considerable worry. It is not merely as representing an industrial area in the Black Country that I am particularly worried about our exports. A large number of people have taken it in hand to advise us how best to spend our post-war income, but I am principally concerned that there will be a post-war income to be equitably divided. That our whole future depends upon exports is, if one may be allowed to borrow an expression of Caxton's, notoriously known throughout the universal world. I do not propose to argue about what is as a stone wall or an axiom of Euclid for obviosity. We must arrange for exports after the war. This country cannot possibly get on by its citizens taking in each other's washing. Unfortunately our export trade has come to an end during the war and companies have not been able to make provision for establishing exports after the war on the account of the Excess Profits Tax. None of us wants to see the old scramble for markets that took place before the war. We all hope that we may manage in collaboration with the United States and our other Allies so to arrange the trade of the world that all may get a fair share. We must, however, have the largest amount of the export trade that can possibly be equitably assigned to us. We have to make a great effort so that funds shall be available after the war for this most necessary purpose.
Therefore, I am moving in this new Clause that it shall be lawful—I do not say obligatory—for the Treasury to permit firms which can prove that they spent money on exports before the war to count as recognised business expenditure money set apart for future trading and development; that each year during the war a

sum shall be payable to the Government to be returned to the firms concerned at the conclusion of hostilities, based upon what was used for that purpose by the said firms before the war, and that this money shall be used for no other purpose than actively prosecuting overseas trade and development. Further, I hope that those firms which in 1940 patriotically followed the Government's advice and pushed exports in every way they possibly could, although they did not have pre-war exports, shall be allowed to pile up some such reserves. An amount of 10 per cent. of the free on board value of the orders they received, roughly calculated for each year, has been suggested. Nobody will, I think, for a moment dispute the fact that exports are absolutely indispensable for the future of this country.
I do not propose to reiterate the cuckoo cry that so many Members somehow or other have used about their being perfectly certain that the Chancellor will not do what they ask him. I would like to look at it from a rather different point of view. We all respect the Chancellor very highly and we hope that he will continue to be Chancellor after the war. We ask him, therefore, to look ahead and to be certain that when he comes to the Budgets after the war there shall be some National Income on which taxes can be levied. It is not a matter of dispute that exports are indispensable. I do not think the Government realise it as much as I should wish. This new Clause is in a general way approved by the Institute of Export and it is approved by a considerable number—I am inclined to think by all—of those firms in the Black country, and especially Bilston, whose trading profits, nay whose very existence, depend to a large extent on their ability to export. I will close with a truism. What Bilston thinks to-day, England will think to-morrow.

Mr. Lipson: I beg to second the Motion.

Sir K. Wood: I congratulate my hon. Friend upon his speech and also upon the excellent support he had from his seconder. I am afraid that I must tell my hon. Friend that his speech was much better than the new Clause.

Mr. Hannah: May I be candid? The speech was my own. The wording of the Amendment was from other hands.

Sir K. Wood: Then I would suggest to my hon. Friend that on other occasions he should seek some other source for assistance because unfortunately I am advised that the new Clause has little or no meaning, and would have no effect, so far as the taxation law is concerned. That is particularly unfortunate when I know what my hon. Friend really desires to do in the matter. The Clause as drafted does not make the provision which my hon. Friend desires and it leaves the existing taxation position exactly as it is. I agree generally, and I think the House does, with what my hon. Friend has said about the importance of exports. I have taken the opportunity on more than one occasion of emphasising that matter. I am sure that it will be a necessary part of the policy of any Government after the war to do their best to promote exports in every possible direction. I must, however, take exception at this time to my hon. Friend's proposal. He desires that certain firms in Bilston and elsewhere should be able to accumulate reserves until the end of the war and that that should be done, I am sorry to say, at the expense of the Excess Profits Tax. I have a great affection for that tax and the money it brings in to me, and I am not in a position to permit a variation of the tax to be effected in that way. If a principle like this were admitted it would go to the very root and basis of the tax. Therefore, my reason for asking the House to reject the new Clause is not in any way directed against the object which my hon. Friend has in mind and which we all commend, but the proposal would be most objectionable from the point of view of taxation and the full obtainment of the Excess Profits Tax.

Mr. Hannah: May I ask my right hon. Friend whether he accepts the principle of this new Clause?

Sir K. Wood: I am always reluctant to commit myself to principles.

Question, "That the Clause be read a Second time," put, and negatived.

NEW CLAUSE.—(Exemption of certain voluntary superannuation funds.)

Sub-section (2) of Section thirty-one of the Finance Act, 1933 (which repeals Sub-section (4) of Section thirty-nine of the Income Tax Act, 1918), shall cease to have effect in so far as the said Section thirty-nine applies to members of a voluntary superannuation fund

registered as a society under the Industrial and Provident Societies Act, 1893, who had become members of such a fund before the first day of April, nineteen hundred and thirty-three, and the said Sub-section (4) of Section thirty-nine of the Income Tax Act, 1918, shall have effect accordingly.—[Mr McNeil.]

Brought up, and read the First time.

Mr. McNeil: I beg to move, "That the Clause be read a Second time."
The purpose of this new Clause is a limitation of an object which I defined on the Committee stage. I and my hon. Friends then asked the Chancellor to accept a Clause which meant that the superannuation fund of the National Union of Journalists should have the investment of its capital exempted from tax as it was previous to 1933. In this new Clause we ask the Chancellor to apply that only to those members of the fund who made contracts between the date of its initiation in 1925 and 1933 because we thought that this would make the Chancellor's position easier. I do not want to detain the House with the history of this unfortunate affair. When the fund was initiated it was exempt from taxation of this kind. In 1933 the Section of the Finance Act designed to deal with the undistributed profits of the Cooperative Societies also applied to the funds of this Union. I think it is beyond dispute—at any rate the Chancellor has made no attempt to refute the statement —that that Section of the Act was never meant to apply to any other profits than what are called the trading profit of such mutual concerns. I am like the hon. Member for Bilston (Mr. Hannah), and unlike other Members who have spoken to-day, full of hope that the Chancellor will accept this simple proposition. It is plainly a simple proposition, and one with which I am sure the Chancellor is not unacquainted, that we should tax justly and that if we tax by accident we cannot be taxing justly. Moreover, the Chancellor said earlier that he was always glad when the supporters of a proposal indicated the cost of it. I meet that point very simply by reminding him that the cost of this to the Treasury is not minus but plus. If he cannot accept this Clause, then, as he knows, the fund will have to be wound up, because it is insolvent, which means that people who were making provision for their retire-


ment may be forced to come back to the public purse for supplementation in their retirement.
Without taking up too much time, I should like to deal with the only point which the Chancellor has made against this proposal in the rather elaborate correspondence we have had on the subject. In saying that I should, perhaps, express immediately my indebtedness to the Chancellor and the Financial Secretary for the facilities they have provided for a discussion of this matter with their officials, though my feeling is that we did all the discussing. In his first letter the Chancellor decided against what he called more favourable taxation treatment to this fund, because he considered it would be a discrimination against mutual insurance concerns not registered under the Industrial and Provident Societies Act. The reply is very short. None of these mutual concerns at any time expected exemption in this fashion. None of them, therefore, based their benefits upon tables permitting exemption. They do not in any way compare with the fund for which we are speaking. Again, the Chancellor in his letter of 13th May seems by inference to be against the exemption because the fund provides for the members accepting what is called a cash option. He has indicated that if this fund can see its way to waive the claim to a cash option and provide only an annuity he might see things in a different light. The arithmetic of the situation rather baffles me, and I must point out that the officials offer no light on this arithmetic, but I say freely that if the Chancellor feels that he can say here firmly that the fund will be restored to its pre-1933 position if the officials take that step, then I will cheerfully go out of my way to persuade them to do so. But I should like a firm assurance. While I have no doubt about the logic or the justice of the case, I have slight doubt about the firmness of the assurance.
The third argument which the Chancellor produced in his correspondence is the old one that since this is not a fund to which employers are joint contributors it cannot be rated for exemption. I quite appreciate the principle behind this, the principle that if a payment is a compulsory one to permit a man to practice or fill any job it should be so rated, but I have pointed out that it means great hardship to the people in this industry, where a joint

contribution is impossible. In his latest letter the Chancellor says that it is 10 years since this enactment was made, and he is apparently driven by that fact to shut his mind against making this change. That, surely, is a most unhappy argument. It is true that after their rather formal protests the officials of the fund sought in 1933 to set their house in order by increasing contributions and by reducing benefits, but is my right hon. Friend going to say solemnly that because for 10 years these people rather foolishly but quite honestly tried to meet the Act by which they were accidentally caught up that should be a reason against his accepting our present proposal? The arithmetic is that at that time it was a solvent fund and that to-day there is a deficit of more
than £22,000.
Finally, the Chancellor says that any Clause granting relief would have serious repercussions and would give rise to other substantial claims. We know nothing of those other substantial claims. We believe, according to an actuary whom we have consulted, that there may be one other fund in a similar position. When we met the chairman of the Commissioners he was equally vague. But even if there are other substantial claims I still cannot understand the Chancellor's argument. If there are other funds which have been dealt with unjustly, is the Chancellor seriously arguing that that is an argument for not making an Amend-ment—that because there are other in-justices this one must continue? I cannot see that that is normal procedure at all. I have kept carefully to the arithmetic, and, as I see it, to the logic of this situation, but I should say that we are not dealing merely with an arithmetical proposition but are dealing with the provisions which some 350 people have made for their retirement. It is harsh, I think, and it is unjust, and I hope that even at this stage the Chancellor may see his way to change his mind. My hon. Friend the Member for Keighley (Mr. I. Thomas) made a joke earlier about the Chancellor suffering from an occupational disease which overtakes Chancellors. He is suffering, too, from an organic disease that seems to be occupational, much worse than the hardening of the arteries. He seems to be suffering rather badly from a hardening of the heart.

Mr. Lipson: I beg to second the Motion.
The object of this new Clause is to give my right hon. Friend the Chancellor of the Exchequer the opportunity to right a wrong, a wrong which was not intended but which was the indirect result of legislation destined to accomplish something quite different. It is true that only some 300 persons are affected, but I am sure the House will agree that its attitude towards an injustice should not be governed by the numbers affected. It is to its credit that it will be prepared to remedy a wrong where only a few people are concerned just as readily as to deal with one that concerns the many. This wrong was created 10 years ago, and the present position is that those who are responsible for the management of the fund are at the end of their financial tether. In 1925 certain journalists formed this financial association for the purpose of providing for their retirement, and within the law as it stood then they were exempt from taxation. As long as the law remained as it was then their fund was solvent and they were able to honour their commitments. Now, 18 years afterwards, at a time when many of them may reasonably have anticipated that they would enjoy the benefits of their sacrifices, they find the fund is over £22,000 on the wrong side. Unless this grievance is redressed the fund will have to be liquidated.
It seems to me that the law with regard to superannuation taxation is somewhat anomalous. If there is a superannuation Lund to which both employers and employees contribute the employees get better benefits and there is exemption from taxation; but if it is a superannuation fund to which only the employees contribute they get reduced benefits, obviously, because the income is smaller, and are also penalised by having to pay a tax upon their investments. That seems to be an application of the principle that to him that bath shall be given more abundantly and from him that hath not shall be taken away even that he bath which I am sure will not commend itself to this House as either right or fair.
I also ask the Chancellor to consider this point. If he says that it is impossible for him to make this concession, who will benefit as a result of that decision? The Treasury will not, because the fund will

have to be liquidated and there will be no income which he can tax. On the other hand, men who have made provision for their old age will find that all their financial arrangements have been upset. I submit that those men, in forming this fund, have done something of which the Chancellor ought to approve. They have tried, out of their own resources, to make provision for their old age, and surely that is a piece of social service that must commend itself to him. At a time when the State is being asked to do so much for people it ought to be a pleasure to him to be able to help those who have tried to help themselves. Therefore, I appeal to him to try to help this union out of its difficulty. When the members entered into their financial commitments in 1925 they did so in good faith and their commitments were based on the law as it stood. Through no fault of their own, but through action taken by a Chancellor of the Exchequer and approved by this House, they now find that they cannot honour those commitments. I submit that as it was the Finance Act, 1933, which put the fund in its present unfortunate position, and as its difficulties are not due to any fault of management and administration, there is therefore a responsibility on the Chancellor to try to help to remedy the present position of the fund.

Sir K. Wood: My hon. Friend who has moved this new Clause has certainly put forward the case with great clarity and persistence, and I think that every argument that could be adduced in favour of some action being taken by this House, and by the Chancellor, he has put. Therefore there can be no regret on anybody's part, or any reflection that all the arguments have not been advanced. On his part, my hon. Friend will, I think, agree that at the Treasury, and by both the Financial Secretary and myself, as much attention has been given to this matter as if it involved the interests of thousands of people and very large sums of money. I was very anxious so far as this particular case was concerned—because I know some of the persons concerned, and I have, as a matter of fact, had this matter mentioned to me from time to time—that there should be no lack of any proper consideration and attention. I think my hon. Friend will also agree that we have given him every attention, and several inter-


views, in the matter. I have myself personally gone into the matter in the hopes that I might have been able to do something directly in the way that my hon. Friend would desire—although, as I shall tell the House, I do not think, if certain steps are taken, that this fund need necessarily be wound up or the worst consequences, which my hon. Friend feared, in fact happen.
My hon. Friend has put down a different Clause from the one he put down on the last occasion. I know how difficult it is to draft these Clauses, and anybody who has not Government assistance will understand that it is no reflection on them that a Clause does not, as this does not, carry out the intentions of its promoters. The Clause, as my hon. Friend has presented it to the House, has little or no meaning because Section 39 of the Income Tax Act of 1918, to which he refers, does not apply to members of a society but only to the society itself. I do not rest upon that fact, hut am only informing my hon. Friend, and it would be impossible for the House to insert such a Clause into the Finance Act at the present time.
Two reasons were referred to by my hon. Friend—and I have already indicated them to him—why I am in difficulties in this matter. I did refer to the fact, which has its bearing, that all this had happened some 10 years ago. The matter has been going on for those years, and my hon. Friends are coming to me to-clay to put things right. I do not say that the matter should not be put right because 10 years have gone by, but it is made somewhat more difficult after all that time has elapsed. I am sure that my hon. Friend will appreciate that point. Again, I would not for a moment hesitate to take steps in this matter whatever the repercussions may be—although I should have to weigh them properly—and I would strain the position, if I thought there was considerable injustice or anything of that kind. I want my hon. Friend and the members of this society to feel assured that it is not because they are a small body of people that I am refusing, as they would think, to do them justice. In fact, it would affect others. What I am bound to take into account is that if I do vary the law and make it retrospective, as I should have to do, so far as these 350 people are concerned, I should have no answer to thousands of other people who could

come to me and say, "You have already done this for a small section, and must in fairness do the same for us." That is the difficulty of repercussions of this kind.
If I were to revive the particular exemption which is desired for one class of industrial and provident society, I am advised that there might very well be claims from many other societies and clubs who lost their exemption as a result of the decision in 1933. In the position which I occupy, one is bound to have that aspect of the matter in mind. Glad as I would be to do so, I could not do it without taking into account that I should have no answer to applications from large numbers of other people for whom I must candidly say—the matter was fully discussed at the time—in right and justice little or no case can be made. The only other matter to be mentioned in connection with this small body of people is the unfortunate position in which they now find themselves, and it is not a question of justice or injustice. It is very unfortunate that this small group of people find themselves in the position that has, I believe quite fairly and properly, been represented to the House.
I have suggested to my hon. Friend—and I can give no undertaking as to what the consequences will be—that a certain course might be followed. At the Treasury we have been looking, and the Financial Secretary to the Treasury and myself have been looking, to see whether the position could be alleviated in any way. We think it could, and that it is worth the consideration of this body. Perhaps my hon. Friend would make this suggestion to them. It is that they should change their practice in regard to benefits and pay pensions instead of lump sums. The real fact is that it is because lump sums are paid that the society feels the incidence of the tax so much. In that event, the tax borne on investment income would be deducted from the pensions and would be treated by the Revenue as tax borne by the pensioner, to whom repayment would be paid if he were not liable to the tax deducted. I am anxious to help them if I possibly can, and these people would be well advised to seek this way out of the difficulty. I promise them this, that I will see that full facilities are afforded them for the discussion which may be necessary in this matter, and my hon. Friend may be assured that we are very anxious to assist this small group of people. If it is possible


to be done in the way I have indicated, I am sure the House would be only too glad to see it so dealt with.

Mr. Ivor Thomas: The National Union of Journalists will no doubt consider with great attention the suggestion made by the Chancellor of the Exchequer and will be grateful to him for making it. I cannot forecast what their answer will be or what my own attitude to it will be, without due consideration. While I recognise the courtesy of the Chancellor of the Exchequer in this matter, as all the House will have recognised from his speech, I cannot see why he has turned down the particular proposal put forward by the hon. Member for Cheltenham (Mr. Lipson). He told us he did it on two grounds; firstly, that it would bring in a lot of other societies as well. It has been made abundantly clear that the fund in question, and any other fund which may be involved, are being taxed by accident. I have refreshed my memory about the Debate in 1933, from which it is obvious that the only funds in mind were those of co-operative societies. The right hon. Gentleman the Member for Devonport (Mr. Hore-Belisha), then the Financial Secretary to the Treasury, made that clear in his speech on that occasion. If it is desired to bring funds of another character under taxation, it ought to be done directly and not as an accidental appendage to some other provision.
The other objection made by the Chancellor was that he would have to make the benefit retrospective. That was new to mc. I do not think the society is asking for a retrospective benefit. It is new to me, and I have had something to do with this subject. As I understand the matter, the society would accept benefit from the present time onwards. This is socially a most desirable fund. It is intended to benefit free lance journalists—not the normal staffs of newspapers—those who are pursuing a profession that is harder than any other that I know of, with the exception of the stage. If the proprietors could be brought to agree, it might be possible to frame a scheme exempt from taxation as office schemes are. That has not been possible. Therefore this taxation affects a class who are hard hit already. We are grateful to the suggestion made by the Chancellor of the Exchequer and it

will be fully considered by those concerned.

Question, "That the Clause be read a Second time," put, and negatived.

Dr. Russell Thomas: Would it be convenient at this point to ask you, Mr. Speaker, whether it is your intention to call the Clause I sent in relating to the relief from taxation of members of a fund where the employees make a yearly guaranteed payment into the fund? I sent it in a couple of days ago.

Mr. Speaker: The hon. Member sent me a manuscript new Clause. I do not propose to select it. Although it is in Order now to accept manuscript new Clauses—it never used to be—I think the opportunity of putting down the Clause should have been taken. It is not fair to the Treasury or to any other Department that I should accept manuscript new Clauses at the last moment when there has been ample time to put them on the Order Paper.

Dr. Thomas: The post is at fault.

Mr. Speaker: I am not responsible for that.

CLAUSE 14.—(Relief where a person is employed or maintained to take charge of children.)

Mr. Daggar: I beg to move, in page 8, line 17, after "him," to insert:
or that he is entitled to relief under section twenty-two of the Finance Act, 1920, in respect of an aged or infirm relative.
It would be interesting to discover the degree to which modern Chancellors of the Exchequer have observed the principles of taxation laid down by Adam Smith, although one might hesitate to accept the year 1776 as one of financial wisdom. Most of us believe that taxation should be justly distributed and that there should be equity or equality in taxation, and recognition of that principle is my own justification for moving the Amendment. Here may I be permitted to observe that concessions already announced by the Chancellor of the Exchequer and provided for in the Finance Bill regarding similar cases are fully appreciated by the persons who will receive the benefit, especially when it is realised that those benefits, expressed in money, are in the region of £2,000,000. If my Amendment were accepted, it would not


involve so large an amount of money. The amount would be very small, but a measure of relief would be provided to the people on whose behalf I am acting.
I know of one case which illustrates a point which I wish to have considered by the Chancellor of the Exchequer. It is the case of a son who was never married, chiefly because of his widowed mother, who is also an invalid. He works at a local colliery and, because of his mother's indisposition, has to maintain his sister to attend upon his mother. He has discharged this obligation, or rather he has carried or accepted this responsibility, for over 14 years, and upon grounds of equity in taxation and in view of certain concessions already made in similar cases, I trust the right hon. Gentleman will accept the Amendment.

Mr. Clement Davies: I beg formally to second the Amendment.

Mr. Assheton: It is very refreshing to anyone at this Box to hear Adam Smith quoted, so seldom are we referred to sound canons of taxation these days. My hon. Friend has proposed an Amendment which has as its object to extend the new housekeeper allowance to cases where a female person is resident with, or employed by, the taxpayer to look after an aged or infirm relative. If my hon. Friend will look at Clause 14 and see the notes in the margin, he will observe that this Clause is intended to give relief where a person is employed or maintained to take charge of children. This Clause he seeks to enlarge. He will remember that the Chancellor made it quite clear in his Budget speech that the proposals he was making for widening the housekeeper allowance were solely concerned with cases where there were children maintained in the household.
I would draw my hon. Friend's attention to the fact that the sort of case he has in mind is met to some extent by the next Clause in the Bill, Clause 15, which deals with the question of allowances for dependent relatives. The taxpayer with a dependent relative has not been overlooked by my right hon. Friend in this Budget, and every person entitled to a dependent relative allowance receives some advantage from Clause 15 in this Finance Bill. I think my hon. Friend will appreciate that the proposal he makes is one which should be met by a Clause

which deals with allowances for dependent relatives. It really has nothing to do with a Clause which seeks to give relief where a person is employed or maintained to take charge of children. In the case which he mentioned there is a son who has a widowed mother, and in that case, as far as I am able to understand my hon. Friend, the son maintains his sister to look after the mother when he is away. In that particular household I should imagine, though I should not wish to pledge myself without exact knowledge of the case, that there was a dependent relative allowance on account of the mother. It may well be said that dependent relative allowances are not enough. One hon. Member has said earlier that they ought to be as high as the personal allowance. They have in fact been increased by Clause 15 in this particular Bill. In these circumstances think my hon. Friend will recognise that something at any rate has been done to meet the case he has in mind.
Amendment negatived.

Mr. Daggar: I beg to move, in page 8, line 28, at the end, to insert:
and
(e) that he has contributed a sum under a court order for weekly payment to the maintenance of his wife and children not resident with and otherwise maintained by him.
I think it is true to say that all Members of the House are familiar with the provision of the Finance Act which permits an allowance in the case of a married man whose wife is living with him of £140, and also of the same amount if the wife is not living with her husband, provided she is wholly maintained by him by means of a voluntary allowance. In other words, if his wife is wholly maintained by her husband by voluntary payment, he is allowed the sum of £140 upon which he pays no Income Tax. In the case of a man separated from his wife, and he makes payment for her maintenance under deed or court order, he is not entitled to an allowance of £140 but simply an allowance of go. This also applies in the case where there are children and, as I have already indicated, in the case where there are no children.
I have a case where a man pays to his wife—not a voluntary allowance—a sum of 32s. 6d. per week, which quite main-


tains his wife and the children, and in addition he has to pay 25s. a week to another woman to attend to his requirements. I submit that whether the payment for maintenance is compulsory or voluntary, such a difference in the personal allowance ought not to exist. It is in order to meet the case I have cited that I move the Amendment.

Mr. E. J. Williams: I beg to second the Amendment.

The Attorney-General: I have done my best to follow my hon. Friend on what he agrees is rather a difficult matter. Actually, of course, his Amendment as put down on the Paper would cut down very much the effect of this Clause. This Clause applies under (a), (b), (c) and (d) the four conditions which have to be fulfilled by a number of enumerated taxpayers who employ someone to look after children living with them. The Amendment proposes to add a new condition which, on the actual words, will have to be fulfilled in all cases, and say:
that he has contributed a sum under a
court order for weekly payment to the maintenance of his wife. …
The effect of that would be to cut out of the Clause all except married people who are under court orders. That was not what the hon. Member intended. I think he has two points. He envisaged a case in which a man was under a court order to pay a sum to his wife for her upkeep and, I think, also in respect of children living with the wife. So far as that matter is concerned—the position of husbands who are under court orders--my impression is that it is already effectively allowed for Income Tax. Either the husband deducts tax from the payments and recoups himself in that way for the tax he must pay to the Revenue, or if he does not do that he normally, as I understand it, would be able to get a special allowance from the Revenue in respect of the payment on the ground that it is money which under the court order is the income of somebody else. I think that is all right.
The hon. Member went on to say that in such a case a man might have to pay someone to look after himself. If that is the point, the answer is in part the same as the Financial Secretary gave to

the previous Amendment. This Clause, and the relief under it, as the Chancellor made quite clear in his Budget speech, is confined to concessions to those who have children living in the household. My hon. Friend's proposal would extend the concession to someone whose children are not living with him but whose children are provided for under the court order, and the allowance would be in respect of a man living by himself paying someone to look after him. That is outside the scope of the Clause, outside the limit of the concession to the group or class to whom this Clause gives relief, and my right hon. Friend cannot accept it.

Mr. Daggar: It is quite true that I cited the case of a man who, in addition to making provision for his wife, maintained to a considerable degree a housekeeper, in order to illustrate an additional hardship. The point I provided for in the Amendment is that the allowance of
140 should be allowed a man regardless of whether the payments are made for the complete maintenance of his wife or children either by deed or court order. The information that is circulated to the taxpayer when he is asked to fill in his form contains the information that the allowance of £140 is also given to a married man if his wife, though not living with him, is wholly maintained by him by means of a voluntary allowance, but that if he makes payment to her by deed or by court order he is not entitled to an allowance of £140 but merely receives the allowance of £80. What I want to stress is, whether the payment is made under a court order or deed or voluntarily, a man should be allowed the same in view of the fact that he makes the payment, and that the question as to whether the payment for wholly maintaining a wife is compulsory or voluntary ought not to prejudice the individual who pays to the extent of the difference between £140 and £80.

The Attorney-General: By leave of the House, I will make this observation. That is really a point quite outside this Clause, which deals with allowances for people who have children living with them. My right hon. Friend will read what my hon. Friend has said to see whether there is any point to look into.

Mr. E. J. Williams: May I ask whether the Chancellor might not be able to meet


the point from the standpoint of the housekeeper's allowance? Perhaps he will consider that?

Sir K. Wood: I certainly will.

Mr. Woods: I think the Chancellor should look into this, because it has been complicated by the present position and the calling-up of some of these women who have been housekeepers. Under this Clause an allowance can only be given if they are in residence. Many of these women are now being called up and the custodian of the children is in the position of having to make much more expensive arrangements to see that his children are properly safeguarded, because he is unable to get a woman, in the present state of the labour market, to reside there, and to take complete custody. He is now penalised twice, and the children are suffering. I hope the Chancellor will look at this problem.

Sir K. Wood: Yes, Sir, certainly.

Amendment negatived.

CLAUSE 20.—(Application of Section 31 of Finance Act, 1941, to sand, gravel, asbestos and mica.)

Sir K. Wood: I beg to move, in page 11, line 17, after "gravel," to insert:
limestone, sandstone, igneous rock, chalk.
The House will remember that under Section 31 of the Finance Act, 1941, certain relief is given in respect of Excess Profits Tax to certain concerns which work certain metals and oil. Clause 20 in its present form applies to sand, gravel, asbestos and mica. These are of exceptional importance in the war effort, and they are all wasting assets similar to metals and oils to which Section 31 applies. Since I put down the original Clause representations have been made to me in various quarters of the House that these other minerals, limestone, sandstone, igneous rock and chalk are equally deserving of relief so far as the war effort is concerned. Many of them, of course, are used expressly for the purposes of the war, and they have as good a case for inclusion in the Clause as the others I have enumerated. The House will recognise that this is a reasonable thing to do, and I am glad that I am able to meet my hon. Friend's request to-day.

Mr. Hannah: I think the Chancellor's speech was very much better than his Amendment. Lime, sandstone and chalk are all sedimentary rocks—that is, rocks laid down by the action of water—as opposed to igneous rocks. It is, therefore, unscientific and most misleading to put the words "igneous rocks" between lime, sandstone and chalk. I suggest that the words "igneous rock" should be put at the end.

Amendment agreed to.

CLAUSE 21.—(Costs incurred by concerns producing certain metals and oil, and asbestos or mica.)

Sir K. Wood: I beg to move, in page 13, line 5, to leave out from "effect" to the end of the Clause, and to insert:
as if references to metal and the mining thereof included respectively references to limestone, sandstone, igneous rock, chalk, asbestos and mica and to the extraction thereof from natural deposits.
The object of this Amendment is to extend Clause 21 to the materials to which I have referred on the previous Amendment. This Clause provides relief from Excess Profits Tax where normal mining practice is departed from, in order to accelerate output, in such a manner that, whereas current costs of production are reduced, it may be anticipated that post-war costs will be increased. The Clause as originally drafted applied to certain metals, oil, asbestos and mica. In the case of the other four materials it is also not uncommon for normal methods of working to be departed from in order to accelerate output.

Mr.Woods: While making no objection to this Amendment, I feel that if a principle like this is to be adopted, and the incidence of E.P.T. is not to be applied because firms are using up something today which in the normal course they might not use up until later, the House should give attention to the question of some penalisation, as firms will be making a profit now. On the other hand, there is the human aspect. Here is a concession by the Government in the interests of finance. It is appreciated that if these concerns worked normally they would make only x profits this year and x profits next year, whereas in fact they will be making x plus this year and x minus perhaps in post-war years. I suggest that the same consideration should be applied to human beings. Attempts have been made


to-day to get concessions for those who are working particularly hard. Those people are being brought into normal taxation, but they are being worn out at an undue rate at present, and they will probably have a protracted old age and be permanently weakened.

Sir K. Wood: That applies to the Chancellor of the Exchequer, too.

Mr. Woods: We shall have to look into that.

Amendment agreed to.

CLAUSE 22.—(Payments to superannuation funds, etc., in respect of back service.)

Mr. Clement Davies: I beg to move, in page 13, line 17, to leave out from "arrangements" to the end of the paragraph, and to insert:
In addition to the ordinary annual contribution or premium payable under those arrangements.
I deeply regret the necessity of moving this Amendment again in exactly the same form as I moved it in Committee. The Chancellor then said that he would give the matter his full consideration, that he wanted to do what was fair, and that between then and the Report stage he would see what he could do. The next Amendment on the Paper in the name of the Chancellor of the Exchequer sets forth the extent to which he is prepared to go. Perhaps it would be convenient if we could discuss my Amendment and the suggested alteration of the Chancellor's together. They hang together, and the subsequent Amendments in my name are all consequential.

Sir K. Wood: And the Schedule.

Mr. Davies: And the Schedule.

Mr. Pethick-Lawrence: Can we get that point settled? I imagine that it will be for the convenience of the House to adopt the course suggested by the hon. and learned Member.

Mr. Speaker: It seems to be a convenient course. It is a matter for the House.

Hon. Members: Agreed.

Mr. Davies: I have heard some very harsh statements about the Chancellor of the Exchequer to-day—that he is hardhearted, that his arteries have hardened,

that he is stiff-necked, that he sticks his toes in, that he is adamant. From a long knowledge of the Chancellor, I know that not one of those descriptions can apply to him. I know of no one more warmhearted or more fair; his attitude on all occasions is cherubic, and almost angelic. We all realise that the voice that we hear in this House refusing Amendments which we put forward is the voice of the Chancellor of the Exchequer but that the hand that has written the refusals is the hand of the Treasury and the Inland Revenue Board; and the phrases that are used here apply certainly to the hand that has written out those refusals. I only wish that the Chancellor could have used upon the Treasury those powers of persuasion which are so effective in this House, but apparently he has succeeded only to a very limited extent. For a long time there has been a tendency for firms and companies to establish superannuation funds for the benefit of their employees when they reach the age of retirement. That is a practice which has increased, rightly, in popularity. Unfortunately, over a considerable time many employers have not been in a position to establish funds which will survive the fluctuations of business. Very often an employer says to his employee, "When you come to retire I shall pay you so much during your retirement." He intends to carry that out, but before he can do so business has gone against him: perhaps he becomes bankrupt, or the business is wound up; and nothing can be done, therefore, for the employee.
In order to get over that, many firms and companies have done one of three things. If they are in a sufficiently strong position financially, they set aside a lump sum to which they add from time to time and earmark it for the purpose of providing for superannuation, and that fund cannot be touched by anyone except the beneficiaries intended to benefit. Another method is to enter into an agreement with an insurance company and pay them a premium year by year, and they in turn make themselves responsible for the payment of the superannuation of the employees. Another method is, if they are able as they progress, that they put aside a certain sum in the hands of trustees who have to carry out the trust, and the fund cannot be used for any other purpose except to provide the pension. That is the position.
Where that money has in the past been taken out of profits of the firm or company it has been allowed in favour of the taxpayer and has been deducted from the assessable profits for the purpose of Income Tax. When the war comes we say, "Now we must distinguish between prewar profits and war profits, and in order to do so a standard is established as to what was the pre-war profit, and that has to be regarded as the standard for assessing profits." The difference between these two is called excess profits, and upon that the Excess Profits Tax of 100 per cent. is paid. For some time after Excess Profits Tax had been chargeable firms and companies still went on making provision for their employees by setting aside sums out of their profits for the provision of superannuation funds. It was legitimate and was held to be right by the courts, and then the matter was raised here in this House by a Question to the Chancellor of the Exchequer, undoubtedly one of those inspired Questions. The Chancellor then says, "When the chance comes for me to deal with the matter in the Finance Bill I shall continue a practice which the Treasury and the Inland Revenue Board regard as right, and I shall introduce a Clause into the Finance Bill which will change the position as accepted by the court and by the ordinary individual." He puts in Clause 22 of the Bill. In that Clause the Chancellor takes up the position of saying, "I shall not allow you to take a sum out of your excess profits and put it on one side in order to provide for the superannuation fund. If you do, I shall do two things. I shall disallow it for the purposes of assessing your excess profits, and I shall treat that sum as being part of your profits which are assessable, and I shall take the lot—100 per cent. But, in addition to that, you will have taken that money out of your pockets and have established a fund which will provide for your employees in the future, and therefore you do not require a similar sum to remain in the business, and I shall regard you now as having taken out of the capital required for the working of the business that very sum which you are now taking out of profits and putting on one side to provide for it." He catches you both ways. He says, "Because profits are to be regarded as though they have been paid out, I shall in addition, regard you now as having lessened your capital to that amount, with the result that in

future your standard profit will be Less and your amount of Income Tax will therefore be increased." We thought that this was distinctly unfair, and that was the case which I put before the Committee and which the Chancellor said he would consider between then and the Report stage.
I suggested at the time that where they had gone wrong was that all the time they regarded this as a payment for back service. I pointed out that it could not be payment for back service. I want to emphasise that again. The contract of service is the contract under which the employee carries out the duties he is engaged to carry out. We will assume for the moment that there is no question of his getting any payment after his retirement and that it is an agreement between the employer and the employee for a wage. The employee works on for I he employer for, say, 40 years at that wage. The employer then loses the services of the employee, who retires. The next stage after his retirement is that the employer then establishes a fund for superannuation for his employees, and under that fund he reveals, for the purpose of calculation, the back service of the employees then still in his employ. The employee who has retired cannot possibly claim under that. He has no rights whatever. His agreement was merely for his wage as long as he was in employment and no more, and he has no claim upon the new scheme. The right to claim superannuation must depend upon the agreement and will date as from the date of the agreement. The purpose of revealing back service in such superannuation agreement or trust deed is in order to make the calculations on which the employee should pay in order to adopt a fair contribution as between those who have been in the service a long time and those who have just come in. The Chancellor of the Exchequer has said, "If you established this fund before February last, or if you entered into a binding undertaking before February last, to establish such a fund, I will allow you to treat it in a certain way. I have told you up to this time that I would not allow you to deduct it at all and that I would take the lot, but now I will allow you to deduct a twentieth of it each year for a period of 20 years. I will spread it over, and you can do one of two things. You can either spread it forward over 20 years or spread


it backwards." That, shortly, is the amount of concession which the Chancellor is prepared to make, but he still retains the unfairness with regard to the capital sum. He says, "No, I will allow that on the profit, but I shall still regard you as having reduced your capital in your business by the amount you have taken out in profit in this particular year, and, by reducing your standard profit and excess profits in future, you will be calculated on that." That is the injustice which will persist.
Excess profits are due to the war situation. We have said that they should belong to the State and that no person should benefit by the agony of the country. We have said that they should be handed over to the Treasury. f that had been done consistently, no one could have moved the Amendment I have moved. But that has not been clone. That would have been right if it had been coupled with complete rationing and the stabilisation of wages and prices. By adding these three, you could have said, "Any profit over and above the standard profit belongs to the community and must he handed to the Chancellor." What happens now? Let me give an instance by taking the good old names of Jones and Smith. Jones says, "I want to play fair by my workpeople. Unfortunately, in the past I have not been able to set aside a sufficient sum to protect them in the future. I want to do that, and now I can do it out of my excess profits. I will not increase their wages unduly for the time being or give them bonuses, but I will take the long view and set aside a sum to provide for their superannuation." If Jones does that, he is doing the best he can and he is not encouraging inflation. The Chancellor says, "No, under the original Clause I will riot let you do it." Then he says, "I will let you do it now and allow you to spread the sum, for purposes of my E.P.T., over a period of 20 years, but I will penalise you to this extent—the amount you have used to establish that fund will be regarded as having been taken out of your capital." Smith says, "I will not do that; I will see the Chancellor does not get his E.P.T. I will increase wages and bonuses at the present moment and pay the whole lot away."

Sir K. Wood: Wait until he does it.

Mr. Davies: That is what is happening; he is doing it now. The Chancellor allows it and cannot question it. The Chancellor says to Jones, "I will not help you; I will encourage the other man." I should have thought that the Chancellor would have encouraged the man who took the long view, thinking that it was his duty towards his employees and industry. I cannot put the matter any clearer, and I hope that even at the eleventh hour the Chancellor will reconsider the question.

Mr. Tinker: May I ask the hon. and learned Gentleman a question? In trying to put his case clearly before the House he mentioned that certain firms were making such excess profits that they were paying bonuses and increased wages. Is the Chancellor aware of that, because, if not, there ought to be an examination of these cases so that he knows what is going on. Will the hon. and learned Member give the names of such firms to the Chancellor?

Mr. Davies: Does not the hon. Member know that wages have gone up since the war and that these are actually deductable from the gross profits in arriving at the chargeable amount?

Mr. Tinker: That is evading the point. There have been legitimate advances of wages, but I am talking about bonus payments. If such things are being done, the Chancellor should know about them so that he can deal with such cases.

Mr. Graham White: I beg formally to second the Amendment.

Mr. Summers: I was one of those who put down a number of Amendments to Clause 22 on the Committee stage of the Bill, and I had the opportunity of speaking in support of an Amendment which the hon. and learned Member for Montgomery (Mr. C. Davies) has now put on the Order Paper again. Since that discussion the Chancellor has had an opportunity of taking into consideration the views that were then put forward. We have had to-day from the hon. and learned Member for Montgomery a lucid exposition of the situation with which we are now faced, but there is one aspect of the problem to which he did not refer and which strikes me as being relevant to a full consideration of the matter. The question as to how these lump sums should be dealt with


was disputed between the firms concerned and the Inland Revenue. The Treasury regarded these sums as relating to the back service of the employees and consequently took the view that they should be spread backwards over a number of years, as indeed they have power so to spread them. The effect of that was to deduct profit in the standard year and the year under discussion by a like amount, with the result that no benefit accrued from so spreading them. The contrary view was held by the firms, who contended that the term "back service" was a misleading term to use in respect of those sums, which were really more properly described as "solvency payments." This was based on the view that the amount which the beneficiary and the firm would contribute would, in the time between now and the date of a man's retirement, be insufficient to pay a reasonable amount, and some additional sum was required to bring up the payment which could be made available to that which it was intended to pay. The view was taken by the firms that the forward spread should prevail, and the matter was taken to the appeal tribunal which held that the firms' view was right and that the Inland Revenue's view was untenable.
They recommended that forward spreading should take place. It is true they recommended that it should only be for so short a period as six years, following Income Tax practice, and one may say, as I said in Committee, that that was possibly unduly generous. But it would be less than generous not to recognise that, in dealing with that point whether backward or forward spreading should be applied, the Chancellor of the Exchequer has given reasonable consideration to the principle and has admitted the merits of the arguments in favour of forward spreading and has so worded his Amendment as to spread these payments over a period of 20 years.
I should regard that period as a reasonable one, but there is one very serious defect in the proposal that the Chancellor has put forward in the light of the arguments put to him, namely, that the only people who will benefit from this Clause are those who have brought forward, or have undertaken to bring forward, a scheme prior to February, 1943. It seems to me that there are two good

reasons why the position taken up by the Chancellor is untenable. In the first place, if it is possible to accept the argument of the appeal tribunal that forward spreading is the right method, as opposed to back spreading, there is no legitimate reason why that should be confined to firms which have started a pension fund during the existence of E.P.T. No one can say for how long Excess Profits Tax will run, and, if the argument is valid in respect of those firms, it seems equally valid applied to a firm which may find it desirable, as we all hope many will, to introduce a pension scheme next year, the year after or the year after that. We are all agreed, I hope, that the development of these pension funds is something to be encouraged, and I see no reason why that encouragement—or absence of deterrent, for that would be more exact—should be limited in this way.
In addition to that, I suggest that in the original Clause the Treasury has thought fit to challenge the opinion come to by the appeal tribunal. In this Amendment it is true he has supported forward spreading, but he has gone back to the Inland Revenue point of view, namely, back spreading, for everything after 1943, so that we are back in the original position to which some of us took exception in the original Clause, namely, that the first opportunity that presents itself to the Chancellor to restore the opinion of the Inland Revenue, despite the findings of the appeal tribunal, is again taken in respect of any further schemes that may be put forward. I suggest on broad grounds alone, quite apart from the merits of the case, that it ought not to be the practice to make statutory a departmental opinion against the findings of an impartial tribunal set up for the purpose.
I should like to ask the Chancellor to give an explanation of the meaning to be attached to Clause 22 (4):
where arrangements are modified by subsequent arrangements so as to provide for new or greater benefits, the original arrangements and the modifying arrangements shall be treated for the purposes of this section as separate arrangements.
There are two interpretations that could be put on the words
so as to provide for new or greater benefits.
I have in mind the case of a firm which made provision a number of years ago to


deal with its staff, when they came to retire. on the basis of certain expectations, but those expectations were not fulfilled, and the fund is insolvent. The Sub-section might mean new or greater benefits than were originally intended, or new and greater benefits than the fund is now capable of paying. Clearly, if additional benefits to those originally intended are required to be treated separately I should raise no objection, but if it is to restore the solvency of a fund as originally contemplated and to bring up the payment it is now capable of making to the original intention, it strikes me as unreasonable to treat that particular situation as something entirely new. I refer to it, because this is an opportunity for clarifying what might be a doubtful point.

Sir A. Maitland: I think that there will be general agreement throughout the House that superannuation schemes ought to be supported in every possible way, and we should expect the Chancellor of the Exchequer to give such encouragement as he can. There may be a tendency to think of the matter in terms of avoidance of taxation. May I put the point as it applies to local authorities? I have an Amendment on the Paper which I understand is not to be called, and therefore with permission I may use it as an illustration to strengthen the argument which applies to industrial concerns. Local authorities are not concerned in their superannuation funds by any sort of evasion of Excess Profits Tax. They are bound to make arrangements under a special Act of Parliament. The main purpose of Clause 22 seems to be that there should not be any charge in a year which cannot be said to be spent in that year. The money spent in a particular year is actual cash from the trading department to the superannuation fund. It is permitted by local authorities, and it should be allowed in the case of industrial concerns to be part and parcel of their expenditure before Excess Profits Tax is arrived at. In the case of industrial concerns paying into superannuation funds, it cannot be said that it is done for the purpose of avoiding Excess Profits Tax. The payments are made by what would be rightly called model employers who are anxious to provide funds so that their employees shall be provided for in their years of retire-

ment. The Chancellor, in rightly trying to prevent an evasion of Excess Profits Tax, is doing so at the expense of good firms whose main purpose is to look after their employees.

Mr. Benson: We are indebted to the hon. and learned Gentleman the Member for Montgomery (Mr. C. Davies) for his speech. I do not think I have ever heard a speech which sounded so reasonable and persuasive and was so completely specious. It was a masterpiece, and I enjoyed every word of it. He started with something which I doubt whether anybody would be prepared to challenge. That is that this House has decided once and for all that war profits shall revert to the State. I do not think anybody is prepared to challenge that as a general principle, and I do not think the hon. and learned Gentleman is prepared to disagree with the decision of the Chancellor that all these payments shall be added back for revenue purposes. He has moved considerably since the Committee stage, when- he was not prepared to admit that they should be added back. Now he has got so far as to suggest that he is in agreement that they should be added back. The gravamen of his complaint now is that the Chancellor's Amendment, which I regard as a very handsome concession, does not deal with the fact that if a certain lump sum is paid out and thereby reduces the amount of capital in the business, the standard is reduced. We have decided that E.P.T. shall be assessed upon a certain given basis, and in that basis includes consideration of the capital used in the business. If a certain amount of capital is withdrawn to establish a superannuation fund, if we are prepared to look at the situation factually, we must admit that it is legitimate that the standard should be reduced. It is not a case of whom benefits or whether this is a worthy purpose or not.
We have decided that E.P.T. shall absorb the profits which arise from war; then because the superannuation fund has a worthy purpose, that does not override that fact. If logically and factually the standard is reduced by a lump-sum payment for this purpose, there is no reason why the taxpayer, that is, the concern involved, should not pay the penalty of its own generosity. It is not generosity if it can avoid that penalty and put it on to the Exchequer. As I said in the discussion on the Committee stage, if we wish to establish superannuation funds, let us do


it with our eyes open and not subsidise them by a back way. Another argument of the hon. and learned Gentleman was that it would be legitimate to reduce the standard if the E.P.T. were an absolutely perfect tax. But because the general principle of the E.P.T. has not been applied with complete perfection, the Chancellor of the Exchequer should make further holes in it and still further reduce its perfection. Surely that argument is merely saying that because we are not perfect we do not require to set ourselves any standard.
Another extraordinary argument of the hon. and learned Gentleman was in the illustration of Mr. Jones and Mr. Smith. Mr. Jones was a good, virtuous employer who looked ahead and provided a superannuation fund. Mr. Smith, on the other hand, threw out money open-handedly in largesse to his employees and encouraged inflation. Is there any truth in this antithesis? Can it be shown that the good employers who look ahead have not raised their wages and the extravagant employers are the ones who have not established funds? It is a purely theoretical construction which has no bearing on the situation. The arguments of the hon. and learned Gentleman are absolutely and completely specious from end to end. They are very clever attempts to make the Chancellor bear the burden of somebody else's generosity.
Let me turn now to the hon. Member for Northampton (Mr. Summers). He put forward two extraordinary arguments. The first was that because the Chancellor has gone so far as to make a point in time before which he will make a concession and after which he will not make a concession he is guilty of gross unfairness. The Chancellor's concession is a pure concession, not based upon logic, not based upon equity but based upon the fact that, as my hon. and learned Friend has said, he has a kind heart and that firms before this date had entered into commitments. The Chancellor has met them because they have made commitments, but does that mean that because certain firms have done this we shall leave the door open for ever? Not a bit. We are entitled to say to firms who have entered into commitments that we shall not penalise them beyond a certain point but that no firms shall enter into new commitments after they have been warned.
Then the hon. Member said another very extraordinary thing, that he was astonished that the Chancellor should make statutory a Departmental opinion. Who does the hon. Member think drafts Finance Bills? Does he think that all the opinions contained in these complicated technical Clauses are the Chancellor's opinions? Of course they are not. They are the Department's opinions. Nobody but an expert has an opinion on these highly complicated matters.

The Attorney-General: That is quite wrong. I do not want to boast of my antiquity, but I have been concerned with many complex Clauses for many years, and it is untrue to say that the Chancellor takes no interest in them. It is easy to explain a point of principle. I can think of many cases in which a Clause as put forward by the Department has been modified in view of the opinion expressed by the Chancellor, let alone the Law Officers. It is wrong to suggest that these Clauses come to the House in the form in which they first emerge from the Department.

Mr. Benson: I suggest that in connection with every highly technical problem it is really the Department's opinion.
The Attorney-General: Well, I do not agree.

Mr. Benson: But the right hon. and learned Gentleman himself is a technician. At any rate, there is no objection whatsoever to the Chancellor or to any other Minister producing a Departmental Amendment or Clause. On the question of whether an impartial tribunal has decided that this is right or wrong, the tribunal has decided that that was the law and we are altering the law of the land as we are entitled to do. If the law was badly drafted and enabled people to be generous at the expense of the Treasury, I think it is time that it was altered.

Sir George Schuster: My hon. Friend the Member for Chesterfield (Mr. Benson) seems to have enjoyed making his own speech almost more than he enjoyed listening to the hon. and learned Member for Montgomery (Mr. C. Davies). I do not propose to follow him, and I wish to say only a few words. I should like to say at the beginning something which has not yet been said and that is to express


my appreciation to the Chancellor, to the Financial Secretary and to the Inland Revenue officials for the very great trouble they have taken over hearing our views on this matter. We must all say that a very honest hearing has been given to our point of view, and although it has not been in all respects accepted we do appreciate that method of dealing with the matter. I do not propose to repeat the arguments of my hon. and learned Friend the Member for Montgomery, but only to say at the outset that I have remained convinced that there is justice in his arguments and that his speech has not been fairly characterised by the hon. Member for Chesterfield. But now that the Chancellor has made a substantial concession, I feel that we have got to accept the position that the Treasury and the Inland Revenue authorities consider that there is great danger in leaving a loophole for these lump sum payments and that they have accordingly decided to go no further. I am prepared to accept that view for the moment anyhow.
But I want to put one or two other points, because I think my right hon. Friend may be able to clear up certain doubts which remain in my own mind, and I understand that his own interpretation may be that which I want to put to him. Apart from the question of simple lump sum payments the whole question of calculating what is to be regarded as back service is an extremely complicated one, and I confess that I do not myself yet entirely understand Section 22. When we were discussing the matter before, I raised the question of the element of back service which might be attributed to certain payments which are made annually but which are regarded as higher than they would have been if the payer had joined the fund at the beginning of his service, although they have been calculated on a proper actuarial basis to give him the pension to which he is entitled when his service comes to an end, I put the point that if the practice of such annual payments which is to be attributed to back service within the meaning of this section is to be the subject of a separate actuarial calculation in the case of each individual—and there must be hundreds of thousands of individuals who might be said to be making back-service contributions—it would really mean that the scheme was unworkable.

But I understand from certain conversations that it is not the intention of the Inland Revenue authorities to make separate calculations in the case of each individual, and that when an arrangement is made for setting up a fund, with an insurance company or otherwise, there would be the broad calculation of what represents back service pay. That sounds satisfactory; but I should like to mention a particular incident to my right hon. Friend. I dare say he knows about it. This general intention which I have mentioned was, I understand, indicated to certain representatives of the chartered accountants; but then one of them, who happens to be a friend of mine, had put before him on the very next day a query from an Income Tax inspector to an important company—it was in fact a company with a capital of £3,000,000 and an Excess Profits Tax standard of something like £250,000—which raised a question as regards a sum of £39 15s. 4d. paid in respect of a single individual and asking what portion of that sum represented back service payment. That looks as though the danger of inquiry into a mass of individual cases is not entirely averted, and I hope that my right hon. Friend will say something about that.
Next, on a point raised by my hon. Friend the Member for Northampton (Mr. Summers), I would like to ask the Chancellor of the Exchequer a question regarding adjustments which may be made in order to make the fund actuarially solvent. There are various ways in which the necessity of doing that may arise. It may be because the average life of the pensioners proves to be longer than was calculated at the beginning; or it may be because one has to take account of the fact that, owing to the eminently successful efforts of my right hon. Friend in reducing the rate of interest to be earned on investments, one cannot earn the rate of interest on investments which was calculated at the beginning; or it may be because the average pension is calculated according to the salary which the pensioner is earning at the date of his retirement and that the average salary on retirement has increased. Those are three possible ways in which it may be found necessary to replenish the fund. I understand that it is not intended to regard payments which are made for reasons of that kind into well-established funds as


containing any element of back service or as coming under the meaning of the subsection quoted by the hon. Member. I hope that my right hon. Friend can give us a clear assurance on that point.
Lastly, I want to come back to the point I myself made when we were discussing this matter before, that no company or individual should be worse off as regards tax liability merely because he has taken action to set up a fund of this kind. We are on very strong ground in this respect. My hon. and learned Friend pointed out what a grave inequity would be created if a sum paid over to trustees for a pension fund is to be treated as having been taken out of the capital of the business and thus as reducing the company's capital standard. I strongly support that view. I know that it is argued that if it is possible to make a transfer of a lump sum of that kind, that is evidence that the money is not wanted in the business, and that it is drawn out of the business. I want to argue very strongly that the capital of a pension fund represents a very definite asset in the business. It has not been taken out of the business. I believe that the Inland Revenue authorities take the view that because it has been handed over to trustees it therefore no longer belongs to the business. But it has been handed to trustees only for a specific purpose—to be held for the benefit of the employees of the firm. The existence of such a fund definitely increases the value and the earning power of the firm.
I understand that another argument has been that you ought not to have an allowance twice over for a sum of that kind. If it is to be treated as still remaining part of the capital of the business, you ought not to be allowed to write it off over the 20 years and have that allowed as a deduction. But if the view is accepted that it is part of the assets of the business, there is nothing inconsistent with ordinary tax law in treating it as a wasting asset which can be written off over a period of years. If I spend £50,000 putting in a new piece of machinery, I have taken that money out of the working capital of my business, but it is still treated as part of my capital and I am in addition allowed to write off that £50,000 year by year, according to the life of the piece of machinery. On every ground we are entitled to argue that money paid over

in that way to a pension fund should be treated as part of the capital of the business.
Even if logical or theoretical arguments can be found against it, I would urge that when we get on to this ground of E.P.T. we find ourselves affected by many considerations which do not allow ordinary logical lines of thought to apply. In fact we ought—and this has been put to us by the Chancellor—mainly to be influenced by one consideration: Is the particular line of action likely to lead to abuse or evasion of proper tax liability? I put it most strongly to my right hon. Friend that he should treat the money paid over into a pension fund as still remaining part of the capital of the business, and that if wise to undertake that he is not going to make a man worse off as regards tax liability because he has entered into an arrangement of this kind, he will be taking a point of view which is certainly not going to lead to abuse. I hope therefore that my right hon. Friend will see reason in my argument.

The Attorney-General: It might be for the convenience of this House if I made some observations now on this point, which is one of some complexity and raises rather difficult problems. It is right to say that two questions of what I may call principle have emerged in the Amendment moved by my hon. and learned Friend, of course, taking account, as we are, of the subsequent Amendments in the name of the Chancellor of the Exchequer, and the first point is whether spreading forward should be introduced as an option for future cases. The second question is whether there should be an 8 per cent, allowance on sums so paid, on the basis that they are capital employed in the business. As was made clear on the Committee stage, my right hon. Friend takes the view on the first point that, in principle and in fairness, a lump-sum payment of the kind which we are speaking about—I will not use the term "back service," because some people do not like it—should either be disregarded or should be spread back. So far as disregarding is concerned, probably everybody would agree that that is quite a fair way of dealing with the matter as compared with spreading back, where the effect of spreading back is to put down the standard period by the same amount as you put down the chargeable period. It


is simply taking off the same sum in each of the two years. You say that you will not take any regard of it.
Where your spreading back may affect the standard period, whereas spreading forward would not, the taxpayer prefers the spreading forward. It is not one of those cases in which anybody is entitled to say that no other view can possibly be held than the view which one holds himself, but the view taken by my right hon. Friend, and which we all take, is that where you get a sum paid, in order that the beneficiaries may get the same benefits as they would have got if payment had been made, say from the time when they first came into the business, the logical course is to spread that back. For Income Tax purposes it was agreed that it should be spread, but it did not matter for Income Tax purposes whether you spread it backwards or forwards, unless you have regard to possible variations of the rate. As Income Tax generally goes up, people preferred spreading it forward, but it did not very much matter, because here was a permanent tax, and spreading it forward obviously caused less trouble and led to less reopening of things than spreading it back. But where you are concerned with the Excess Profits Tax, and where you have, as you must have, machinery for spreading payments which, though they fall in one year, relate to many years, it is important and necessary to consider whether in fairness and logic you ought to spread it forwards or backwards.
You have to consider what is the fair method of dealing with this problem as between a company which set up its fund and made its lump-sum payment before its standard year and a company which did not set up its fund or did not make its lump-sum payment until after its standard year, and you want to see that you deal reasonably and fairly as between them. But, as I say, my right hon. Friend's view, for the reasons which I have tried shortly to give, is that spreading backwards is the logical thing to do. Therefore, it would seem to point to spreading backwards. That was the result which we thought would be arrived at by the application of Section 33 of the Finance Act, 194o, which deals with this problem of spreading payments for Excess Profits Tax. However, some people

thought they could produce an argument that there should be a spreading forward. The case we of know of came before the Board of Referees. They ruled in that case, though they did not lay down a general principle, that they thought the case was justified. My right hon. Friend then thought, as he always thought, that spreading backwards is the right and the logical principle. Not having so provided by Statute, as it turned out in the general words in the Act of 1940, he thought it right, after the discussion in Committee, to provide that the people who had entered into commitments or paid these lump sums before he made his statement in February, the actual date on which his intention was announced, and who might have entered them on the basis that they could spread forward, should have the additional option of spreading forward. We do not believe it is logical in principle, but as it has been held in a particular case that that was a result of the existing Statute, it seemed reasonable they should be entitled to spread forward.
My hon. Friend the Member for Northampton (Mr. Summers), who has been, if he will allow me, extremely fair on this point, when dealing with this matter on the Committee stage, did suggest that six years was probably too short a time. I think it must be recognised by everybody that it would not be a right result to enable a payment of this kind to be financed in effect wholly by the general body of taxpayers and that it should come wholly out of money which would otherwise come out of Excess Profits Tax. The hon. Member for Northampton suggested a period of 20 years, I think, which is roughly half a man's normal working life. Therefore, in spite of the appeals which have been mentioned, my right hon. Friend thinks it right to restrict the spreading forward to past cases so as to meet the demand in cases in which the person concerned has thought or been advised that the law entitled him to spread forward, and for the future to lay down the principle, which many people thought did result from the original Act, that either it can be disregarded or you can have an option to spread backwards.
I would like to say a word or two on this question of whether there is unfairness in my right hon. Friend's attitude in


resisting the suggestion that these sums should be regarded as capital employed in the business. It is perhaps worth pointing out that if they were, the company or firm would of course get an allowance of 8 per cent, in respect of their Excess Profits Tax liability, while at the same time the money would be earning 3 per cent., presumably, for the fund, so that if one regards the superannuation fund—wrongly, in my view—as something so connected with the business, that it must be regarded as money used in earning profits, it would in effect be an 11 per cent. allowance instead of 8 per cent.

Sir G. Schuster: Surely the Attorney-General is wrong in saying 8 per cent. Should it not be 6 per cent.?

The Attorney-General: I think that on the whole it would work out at 8 per cent. What is to be regarded as capital employed in the business is to be decided by considering what capital is employed in earning the profits. Anybody would agree that the idea in essence is a perfectly simple one. In Excess Profits Tax you are comparing the earnings of one year with the earnings of another year, and if the earnings of the standard year are exceeded by those of the chargeable year, my right hon. Friend takes the difference. If a business has been expanded—money may have been raised or sunk in plant or extra buildings or whatever it may be, in order to expand the business—it is right that regard should be had to that, and that in comparing the profits of the standard year with the profits of the chargeable year you should realise that the profits of the chargeable year have got to take care of, to use an expression not infrequently used, the extra capital which has been sunk in the business and caused its expansion. That is the broad principle. How is it applied in areas other than this area which we are immediately considering namely, superannuation funds? Invested reserves are not, in the case of ordinary trading companies, as the House knows, regarded as capital in the business, for obvious reasons. It surely would be a very curious result if, while maintaining that principle, you said that the capital endowment of the superannuation fund was to be treated as employed in the business. In many case, not necessarily in all, I agree, this process which we are considering of setting up or putting on a new and

expanded basis the superannuation fund will be financed out of reserves, out of invested reserves very often, not always. This is the lump sum. The annual profit takes care of the annual sum. In the case of the lump sum it will very often be said, "We have the money invested; we will transfer it to the trustees." It would surely be a curious position that
hile these sums were invested and were there as reserves wholly under the control of the company, they were not regarded as capital employed in the business, but were regarded as capital employed in the business when they were transferred to the trustees of a superannuation fund.

Mr. C. Davies: Perhaps I had better put my argument in the form of a case. Let us say that the Westminster Company has a capital of £250,000. That is its standard capital, which it chooses for its standard year. Now, in 1943, it makes a profit above its standard profit; we will say that it is £30,000. The right hon. and learned Gentleman says that that £30,000 shall be deducted in future from the £250,000, and that the future capital shall be regarded as £220,000, although the capital is exactly the same as in 1937 for the purpose of the business and for earning the profits. At present, under the Clause, they are going to reduce that capital for taxation purposes to £220,000.

The Attorney-General: It is very difficult to follow these cases. If the one picture is that the £30,000 remains as capital employed in the business——

Mr. Davies: I have put it aside for superannuation.

The Attorney-General: If you did not put it aside for superannuation, would it remain as capital employed in the business? Would it be invested? If invested it would not be treated as capital employed in the business. [Interruption.] We do not need to say that people who hold the opposite view should be treated as mental. There is a prima facie case indeed that funds which are set aside in the hands of trustees for superannuation purposes are not capital employed in the business. I thought that that was a fairly plain and simple proposition. I was going to give a further reason why I thought that was the right view, by pointing out that Excess Profits Tax, as at present administered, does not treat invested reserves-£—which should have thought much more dubious —as capital employed in the business.

Mr. Davies: In the one case I put aside the £30,000 for a superannuation fund, in the hands of trustees; so I establish my superannuation fund. As the law stands, under this Clause, you will then say, not only is that capital not employed in the business, but I have reduced my capital that much in future. If I had put it in some other industry, my capital would have remained the same.

The Attorney-General: It is very difficult to deal with concrete cases at short notice, but, as I understand the position, if that £30,000 were invested as a reserve to the business, it would not be so treated, and then the same result would follow as happens here.

Mr. Woods: The right hon. and learned Gentleman refers frequently to these lump sums, declining to describe them as back payments. He leaves us in considerable uncertainty as to what he means by these lump sums.

The Attorney-General: I thought the discussion had been going on so long that everybody was familiar with what I meant. That was my mistake. The type of payment which may be made as a lump sum or as a series of payments, is this. A company desire to set up a superannuation fund. A number of their employees will be due to retire next year or the year after, or, anyhow, within 20 years, and have served the company for a considerable time. They desire that the fund should be such that they will be able to get exactly the same benefit as would be provided for by the annual contributions for people who have served the full time. They therefore make a payment, which was referred to for convenience as a lump-sum payment, into the fund in order that the man who retires next year who will have made a very small contribution to the fund—and the employers will have paid in a very small amount in respect of him —should have the same rate of superannuation as is paid under the scheme.

Mr. Douglas: There is nothing in the Clause about a lump sum.

The Attorney-General: This, I said, if the hon. Member would listen, is a sum which can be paid as a lump sum or paid in a series of payments. It is rather cumbrous to repeat every time "in a lump sum or series of payments," and it has been convenient in the discussion as a

whole to refer to it as a lump sum. The hon. Member is right. Back service payments can be made by a lump sum—the Clause provides for it—or a man can make arrangements for payment in five, 10 or 15 years as the case might be. My hon. Friend the Member for Walsall (Sir G. Schuster) referred to the argument that it is unusual to treat as a capital sum a sum which you are entitled to deduct for the purpose either of Income Tax or Excess Profits Tax. He tried to assimilate the case of a sum like this to the allowances which are made to say, wasting assets such as machinery, but that is rather a long shot. It would be contrary to ordinary principles, first of all, to allow the annual deduction whether straight, backwards or forwards, and also to treat the asset as a capital asset. There are arguments on both sides, but on the whole we think that in allowing this, as we do, as a deductible expense, if the man wants it, it would be somewhat illogical to treat it as capital.
I want to say a word on the question on which many Members are interested as to whether you could describe this Clause as a deterrent to the setting up of these funds. Everybody agrees that you must not allow this fund or payments to be financed solely out of excess profits. On the other hand, you certainly do not want to deter the setting up of these funds in war time. It is true to say that, with the Clause as it stands, there is a financial advantage to people in setting up these funds now as compared with the position if they were set up before the standard period. Take the man who set up a fund of this kind in 1932—and we are not now dealing with lump sum payments but current payments—and a current payment of some £2,000 a year comes off his standard year and his chargeable year. Suppose he starts the same sort of scheme now, the £2,000 will be taken into account in his chargeable year and he will be able to compare the chargeable year with the standard year in which no payment is deducted.

Mr. C. Davies: You pay five and withdraw eight.

The Attorney-General: It is true to say that the man who sets up a fund now will in future get the current annual payment deducted and will not have his standard year weighted with a payment of this kind.

Sir G. Schuster: Will my right hon. and learned Friend please elucidate that, because I find it difficult to follow? If a fund was set up after 2nd February, 1943, payments will be adjusted backwards——

The Attorney-General: No, they can be disregarded altogether.

Sir G. Schuster: Payments will be adjusted backwards.

The Attorney-General: No, the only payment which can be adjusted backwards is the payment in respect of back services. I am now talking about current payment. In all these cases, in addition to what we call back-service payment, which is to get the fund started on a proper actuarial basis, there is an annual payment which takes care of the liabilities arising and accruing year after year. I am not talking about a lump-sum payment. I am talking about, say, £2,000 a year which a company pays in all future years in addition to, say, a lump sum of £50,000. It is quite simple. A company starts a fund in 1932 or 1933 and to get it started makes a lump-sum payment of £50,000, which we disregard, and then it keeps the fund solvent by a payment of £2,000 a year.

Mr. Woods: Will that be treated as a special sum?

The Attorney-General: I am assuming that the fund is set up. The proportion as between employer and workmen's contribution is quite irrelevant. The employer pays £50,000 down in order to look after back service, and in addition to that, in order to keep the fund going, he makes a contribution of £2,000 a year. That is in respect of current services of the men, and that £50,000 plus the £2,000 a year will, so far as calculations go, enable the benefits to be paid as the men come to their retiring age. If the fund was set up before the standard period, the £2,000, the current liability of the employer, is deducted in the standard period and is also deducted in the chargeable period. On the other hand, if a company decided to set up a fund of a similar kind and on a similar financial basis, subsequent to its standard period, the £2,000 a year, the current obligation of the employer to the fund, would, of course, fall to be deducted in the chargeable periods, but the profits of these chargeable periods would fall to be compared with the standard period in which

there was no such deduction, because the fund had not been then set up. This matter has been considered with some care, and I hope and believe that the Excess Profits Tax structure with this Clause cannot in any way said to be deterrent to- the setting up of such a fund as this. It will give some, not great, slight advantage to firms which set up these funds in the year subsequent to the standard period as compared with firms which set them up before.

Sir G. Schuster: Take my right hon. and learned Friend's example of a fund set up before the chargeable period with a lump-sum payment of £50,000 down and £2,000 a year. I want to compare that with the position of a man to-day who is considering whether to set up a pension fund. If he says to himself, "I will pay £2,000 a year," that is all right, but we are concerned with the motive which will influence him in setting aside the lump sum of £50,000. It seems to me, if I have understood it, that, if he puts aside the lump sum, not only will he have that reckoned backwards, so that £2,000 a year is taken off his standard profits, but he will also have £50,000 deducted from his capital, which will reduce his E.P.T. standard. That is how it appears to me.

The Attorney-General: I was dealing with payments other than the lump-sum payment. The lump sum payment, of course, can be disregarded altogether, or it can be spread back.

Sir G. Schuster: It can be disregarded for one purpose, but it cannot be disregarded from the point of view that it is going to be taken off the firm's capital.

The Attorney-General: My hon. Friend is always assuming that it is taken out of the capital employed in the business. That does not in the least follow. The normal thing would be take it out of invested reserves. It is a very special and unlikely case that a lump sum would be taken out of the capital employed in the business. To summarise what I have said on the point which I think my hon. Friend has in mind, in the normal case, as we see it, this would be met out of invested reserves, which are not treated as capital employed in the business under the existing structure, and in any event we do not think it would be possible to regard a fund of this kind, the money in


which is earning its own interest, as capital employed in the business for the purposes of Excess Profits Tax.
One of my hon. Friends asked whether I could state how we propose to regard certain cases that may arise. My hon. Friend the Member for Northampton referred to what I believe in this area are called deficiency or solvency payments, that is, payments made into a fund in addition to those originally contemplated, either because of the fall of interest rates or for one or other of the three reasons that he gave. We should not regard either lump sums or a series of sums paid into a fund to cover these contingencies as within the Clause. I was also asked by my hon. Friend about the possibility of a very elaborate analysis, possibly of a series of payments, in order to see whether the payment made in respect of some particular individual might have some back-service element in it. It is not my right hon. Friend's intention to indulge in such a detailed and meticulous analysis, and I am sure that he would be glad to have particulars of the case which my hon. Friend referred to. We do not intend that the annual contributions should be subject to analysis to see whether there is some possibly small back service element in them. The only cases with which we are concerned are those in which it is quite certain that the annual payment has, as it very often quite properly has, a substantial back-service element contained in it.
I am conscious that I have not satisfied all my hon. Friends. I am also conscious that I have been trying to deal with a very complicated matter and that I may sometimes have used the shorthand which is used by those who are particularly familiar with this type of subject, which has made my argument at times a little difficult to follow. If that is so I hope the House will be indulgent with me. To sum it up, we feel that we have made a reasonable concession and we are not prepared to go further on the lines indicated by hon. Members.

Mr. Rhys Davies: I said a few words on this Clause when the Bill was in Committee and I am hoping, conceitedly, that what I said may have induced the Chancellor to make a little concession. I see the right hon. Gentleman nodding his head, from which I take it that I succeeded.

Sir K. Wood: My hon. Friend always succeeds.

Mr. Davies: It seems to me, however, that the Chancellor has been using a steam-hammer to crack a nut. I would like to know how much taxation is involved here. Judging from what the right hon. and learned Gentleman has been telling the House, I should imagine that the administrative cost of implementing what we are discussing will be more than the total sum involved. One would imagine from the speeches delivered from the Front Bench that every employer is anxious, so charitably disposed is he, to give money away to superannuation funds in order to avoid taxation. I can assure the House that nothing of the kind is happening. I have been agitating for years to get pensions and superannuation funds started and I have never yet met an employer who was anxious to ladle his money into a pension fund in order to avoid paying taxation.

Mr. Benson: We have never had a 100 per cent. tax before.

Mr. Davies: The hon. Gentleman must remember that practically all who benefit from these funds are members of the working class. I do not like anybody taking the side of the Chancellor, the powerful instrument of the State, against the thousands of poor people who will benefit at 65.

Mr. Benson: Is the hon. Gentleman suggesting that any proposal which may benefit the working class shall be accepted in this House whether it is sound or not? Are we here simply for the purpose of ladling out money? Have we no responsibilities?

Mr. Davies: The State has accepted financial responsibility for tens of millions of money irrespective of principle. The State pays £7,000,000 a year as a subsidy to National Health Insurance and more millions still to Old Age Pensions. Members of all parties have been proud to have taken a hand in giving State subsidies to keep our poor old people in decent conditions. I do not understand the hon. and learned Gentleman the Member for Montgomery (Mr. C. Davies) when he speaks about investing those funds and regarding them as capital in the business. I always understood that once the contribution of the employer,


whether by a lump sum, or an annual sum plus contribution, was made, it was handed over to trustees and then invested in Government or municipal corporation stock. The money is then clean out of the business and has nothing to do with it at all. That is the cleanest way to do it. I remember the Chancellor when he was a much younger man and I recall how he championed the National Health Insurance scheme. Perhaps he had better be reminded that he wrote some books about it and that they had a wonderful sale. It may interest the hon. Member for Chesterfield (Mr. Benson) to know that the right hon. Gentleman actually advocated subsidising from the Treasury pensions 'and benefits for millions of people, and I am not sure that it is not the case that he is there because he did that.
Finally, I hope sincerely the House of Commons will, irrespective of party, take the line of encouraging employers and employed to build up these funds to assist people who have worked all their lives to retire at 65 years of age and live in decent circumstances. Bank clerks, insurance clerks, co-operative employees —we are proud of the co-operative movement for what it has done in that connection—have these superannuations funds, but I want to see dockers, miners, engineers, all the manual workers in this country, enjoying exactly what bank clerks and insurance clerks are enjoying. Therefore, instead of the House trying to prevent employers putting down £50,000 or £100,000 to establish funds of this kind the State ought to encourage them in every possible way and remove taxation from any such funds. Before this war that is what the Chancellor of the Exchequer would have said if he had been sitting on this side of the House. That is what he used to say in days gone by, and I cannot understand him taking up his present attitude —only now, of course, he is at the Treasury and that makes a difference. I remember him longer on these benches, and I am hoping to live long enough to see him back here where he used to be. But if that should happen his superannuation is safe, anyhow. I am very glad that the Treasury have given way a little, and I am hoping that we shall live long enough to see these superannuation funds covering all working people.

Mr. Woods: I think the House and those in the country who are interested in superannuation will have to study very carefully the speech made by the learned Attorney-General to discover exactly what is indicated in the Amendments and concessions made by the Government. I hope that we shall have some statement which will put it in more simple language, so that the average person who is affected will be able to understand what is taking place. I can assure the Chancellor that there is a good deal of uncertainty arid misgiving concerning this present Finance Bill and the way it will affect superannuation funds. With the younger men being called up, the weight of industry—and especially is this true of the distributive industry—is falling on the older men who are fast approaching the retirement age. They have a feeling that something is being done which is definitely endangering these funds.
The Chancellor can easily dismiss it and say that where regular payments are made, and where there are quinquennial valuations and the fund is made solvent under the supervision of the actuaries, that may be taken as the contribution arid not a special sum. That would be a relief at any rate, but many of these funds are very old fashioned. They were started with a good deal of misgiving and timidity and if they are to be really effective there must be substantial improvement. They were made when the purchasing value of money was extensive compared with what it is to-day. There are many responsible employers and employees who feel that while half-a-loaf is better than no bread, if they are to have a superannuation fund so that the aged can retire, that retirement should be in comfort and not in want and anxiety. A good many concerns have no desire to exploit superannuation funds in order to "diddle" the Treasury and are acting in a perfectly legitimate manner. I am convinced that they feel that, as a result of these modifications, it will be increasingly difficult for them to make their schemes satisfactory to themselves and to their staffs, who have a right to demand peaceful retire-men after giving their lives to industry.
The Chancellor has made some concessions, but if he is not prepared to make any further concessions, perhaps he would give the House a pledge to watch this matter very carefully during the coming


year. I do not want to get involved in the question of capital assessments but that matter will have to be watched. The House and the country would be behind the Chancellor in taking action against those who tried to evade Excess Profits Tax, but they would be equally unanimous in the desire to extend satisfactory superannuation schemes.
Reference has been made to municipal employees. I remember what concern there was some years ago when the Poor Law administration was taken over, and when it was found that municipal employees were covered only by voluntary schemes. Pressure was then applied, with the result that municipal staffs, including those administering the old Poor Law, were covered in a scheme. Many industries have demonstrated that responsible employers can carry on their business, pay trade union rates of wages and give decent conditions, and at the same time make provision for superannuation funds. The demand is now being made that if one group of employers can do this kind of thing, it should be done generally. I hope that the Chancellor will see that, whatever else happens as a result of the modifications in the Finance Bill, if there is any prejudice against further extensions of superannuation schemes, he will come forward with the necessary modifications in the next Finance Bill.

Mr. Douglas: I should like to be clear about one point. Is it correct that the arrangements under this Clause will not apply to local authority superannuation funds in respect of payments made into them to maintain their solvency as a result of the investigations made by the actuaries on the quinquennial valuation? That, I understood, was covered, though it was not expressly mentioned in what the Attorney-General said, where he instanced a cause of revaluation instituted by a fall of interest rates. I want to point out that the deficiency may be due to other causes. It may be due to an increase in the number of staff employed, so that the initial payment which was made when the fund was started is not sufficient to meet the demand which will ultimately be made, because of the growth of staff. The new staff which is taken on will be entitled ultimately to benefit in respect of what is called back service under this Clause. It seems to me that as it is drawn it is wide enough to

cover a case of that kind and prevent payment on a revaluation from being charged as an expense in connection with tax.

The Attorney-General: As regards the position with regard to local authorities, it only applies if a local authority is paying Excess Profits Tax. If it is paying E.P.T., it is right that it should be treated in the same way as any other body. There is an Amendment later on the Paper to make it quite clear that a payment by a local authority under an enactment is on the same basis as payment made, say, by an employer under a trust deed or under a contract. I do not think I can give a specific answer as to how it will 'work out in some specific case. The assurance I have given about what are called deficiency payments on the three points raised by the hon. Member for Walsall will apply to local authorities if they are that sort of people.

Amendment negatived.

Sir K. Wood: I beg to move, in page 13, line 31, at the end, to insert:
and
(ii) if the person carrying on the trade or business so elects and the payment was made before the second day of February, nineteen hundred and forty-three, or was made in pursuance of an undertaking to make it given before that date, the provisions of the Schedule to this Act (Provisions as to back-service payments made before, or in pursuance of undertakings given before, the second day of February, nineteen hundred and forty-three) shall have effect in relation to the payment, and, where the payment is one of a series of payments, also in relation to the other payments.

Sir P. Bennett: I beg to move, as an Amendment to the proposed Amendment, in line 4, after "given," to insert "or of an enactment passed."
I move this Amendment in the absence of the hon. Member for Faversham (Sir A Maitland).
It is to put in order the point which the Attorney-General just mentioned, that whereas a firm gives its pension fund, a local authority is bound by Act of Parliament to do so. The Chancellor quite understands.

Sir K. Wood: I am prepared to accept it.

Amendment to the proposed Amendment agreed to.

Amendment, 'as amended, agreed to.

NEW SCHEDULE.—(Provisions as to back-service payments made before or in pursuance of undertakings given before 2nd February, 1943.)

1. In the case of a payment which is not one of a series of payments there shall be deducted in computing the profits of the accounting period in which the payment was made a sum equal to one-twentieth of the amount of the payment, and the like deduction shall be made in the next succeeding accounting period, and so on, and no other deductions shall be made in respect of the payment or any part thereof in computing the profits of any accounting period:
Provided that—

(a) where any accounting period is less than twelve months, the amount to be deducted in the case thereof shall be proportionately reduced so as to correspond with the length of the period;
(b) the total of the sums deducted shall not exceed the amount of the payment.

2. In the case of a series of payments the same deductions shall he made as would have been made under paragraph I of this Schedule if a single payment had been made at the date of the first of the payments of an amount equal to the actuarial value, estimated as at the date of the said first payment, of all the payments, and no other deductions shall be made in respect of any of the payments or any part thereof in computing the profits of any accounting period.

Provided that—

(a) the sum to be deducted in the case of of any accounting period shall not, together with the sums deducted in the case of previous accounting periods, exceed the total payments actually made up to the end of that accounting period; and
(b) where, by virtue of the foregoing proviso the amount of any deduction is reduced, the deduction which falls to be made in the case of the next succeeding accounting period shall be correspondingly increased, subject, however, to the application of that proviso to that succeeding accounting period, and so on.

3. References in this Schedule to accounting periods include references to accounting periods no part of which fall within the standard period (if any) or any chargeable accounting period, and this Schedule shall have effect as if the profits of all such accounting periods had to be computed for the purposes

of excess profits tax, and the expressions "the total of the sums deducted "and" the sums deducted in the case of previous accounting periods" shall be construed accordingly.

4. This Schedule shall not apply to any payment unless it is a payment in respect of which a deduction is admissible on Income Tax principles and unless, apart from the provisions of this Act and of Sub-section (2) of Section thirty-three of the Finance Act, 1940 (which relates to the spreading over several accounting periods of deductions not reasonably and properly attributable to one period only), a deduction in respect of that payment or, where the payment is one of a series of payments in respect of one or some of those payments, would have fallen to be made in computing the profits of an accounting period consisting of or including the whole or any part of the standard period or a chargeable accounting period.— [Sir K. Wood.]

Brought up, and read the First and Second time, and added to the Bill.

Sir Peter Bennett: On a point of Order. You have not put the Amendment, Mr. Deputy-Speaker, to insert, in line 6, the words "or enactments passed," although it covers the same point as the Amendment just made.

Mr. Deputy-Speaker(Mr. Charles Williams): That Amendment has not been selected.

The Attorney-General: It is unnecessary.
Bill to be read the Third time upon the next sitting Day, and to be printed. [Bill 46.]

The remaining Orders were read, and postponed.

It being after the hour appointed for the Adjournment of the House; Mr. DEPUTY-SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.